Correlation Between Norsk Hydro and Clean Energy
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Clean Energy 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 Clean Energy 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 Clean Energy Fuels, you can compare the effects of market volatilities on Norsk Hydro and Clean Energy 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 Clean Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Clean Energy.
Diversification Opportunities for Norsk Hydro and Clean Energy
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Norsk and Clean is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Clean Energy Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Energy Fuels 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 Clean Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Energy Fuels has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Clean Energy go up and down completely randomly.
Pair Corralation between Norsk Hydro and Clean Energy
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 1.4 times less return on investment than Clean Energy. But when comparing it to its historical volatility, Norsk Hydro ASA is 1.65 times less risky than Clean Energy. It trades about 0.05 of its potential returns per unit of risk. Clean Energy Fuels is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 262.00 in Clean Energy Fuels on September 14, 2024 and sell it today you would earn a total of 6.00 from holding Clean Energy Fuels or generate 2.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Clean Energy Fuels
Performance |
| Timeline |
| Norsk Hydro ASA |
| Clean Energy Fuels |
Norsk Hydro and Clean Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Clean Energy
The main advantage of trading using opposite Norsk Hydro and Clean Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Clean Energy 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 Clean Energy will offset losses from the drop in Clean Energy's long position.| Norsk Hydro vs. Taylor Morrison Home | Norsk Hydro vs. American Homes 4 | Norsk Hydro vs. Haverty Furniture Companies | Norsk Hydro vs. Autohome ADR |
| Clean Energy vs. Superior Plus Corp | Clean Energy vs. SIVERS SEMICONDUCTORS AB | Clean Energy vs. Norsk Hydro ASA | Clean Energy vs. Reliance Steel Aluminum |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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