Correlation Between Norsk Hydro and Evolution Mining
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Evolution Mining at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Norsk Hydro and Evolution Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norsk Hydro ASA and Evolution Mining Limited, you can compare the effects of market volatilities on Norsk Hydro and Evolution Mining and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Norsk Hydro with a short position of Evolution Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Evolution Mining.
Diversification Opportunities for Norsk Hydro and Evolution Mining
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and Evolution is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Evolution Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining and Norsk Hydro is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Norsk Hydro ASA are associated (or correlated) with Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Evolution Mining go up and down completely randomly.
Pair Corralation between Norsk Hydro and Evolution Mining
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 6.04 times less return on investment than Evolution Mining. In addition to that, Norsk Hydro is 1.05 times more volatile than Evolution Mining Limited. It trades about 0.02 of its total potential returns per unit of risk. Evolution Mining Limited is currently generating about 0.13 per unit of volatility. If you would invest 215.00 in Evolution Mining Limited on September 13, 2024 and sell it today you would earn a total of 99.00 from holding Evolution Mining Limited or generate 46.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Evolution Mining Limited
Performance |
| Timeline |
| Norsk Hydro ASA |
| Evolution Mining |
Norsk Hydro and Evolution Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Evolution Mining
The main advantage of trading using opposite Norsk Hydro and Evolution Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Evolution Mining can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Evolution Mining will offset losses from the drop in Evolution Mining's long position.| Norsk Hydro vs. Goosehead Insurance | Norsk Hydro vs. RETAIL FOOD GROUP | Norsk Hydro vs. COSTCO WHOLESALE CDR | Norsk Hydro vs. SBI Insurance Group |
| Evolution Mining vs. ADRIATIC METALS LS 013355 | Evolution Mining vs. ALERION CLEANPOWER | Evolution Mining vs. MCEWEN MINING INC | Evolution Mining vs. KENNAMETAL INC |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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