Correlation Between Nippon Telegraph and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Nippon Telegraph and Norsk Hydro 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 Nippon Telegraph and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nippon Telegraph and and Norsk Hydro ASA, you can compare the effects of market volatilities on Nippon Telegraph and Norsk Hydro 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 Nippon Telegraph with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Telegraph and Norsk Hydro.
Diversification Opportunities for Nippon Telegraph and Norsk Hydro
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nippon and Norsk is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Telegraph and and Norsk Hydro ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsk Hydro ASA and Nippon Telegraph 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 Nippon Telegraph and are associated (or correlated) with Norsk Hydro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norsk Hydro ASA has no effect on the direction of Nippon Telegraph i.e., Nippon Telegraph and Norsk Hydro go up and down completely randomly.
Pair Corralation between Nippon Telegraph and Norsk Hydro
Assuming the 90 days horizon Nippon Telegraph and is expected to under-perform the Norsk Hydro. But the stock apears to be less risky and, when comparing its historical volatility, Nippon Telegraph and is 2.13 times less risky than Norsk Hydro. The stock trades about -0.01 of its potential returns per unit of risk. The Norsk Hydro ASA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 428.00 in Norsk Hydro ASA on October 26, 2024 and sell it today you would earn a total of 146.00 from holding Norsk Hydro ASA or generate 34.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Nippon Telegraph and vs. Norsk Hydro ASA
Performance |
| Timeline |
| Nippon Telegraph |
| Norsk Hydro ASA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Nippon Telegraph and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nippon Telegraph and Norsk Hydro
The main advantage of trading using opposite Nippon Telegraph and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Telegraph position performs unexpectedly, Norsk Hydro 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 Norsk Hydro will offset losses from the drop in Norsk Hydro's long position.| Nippon Telegraph vs. FANDIFI TECHNOLOGY P | Nippon Telegraph vs. Amkor Technology | Nippon Telegraph vs. GMO Internet | Nippon Telegraph vs. Charter Communications |
| Norsk Hydro vs. Lifeway Foods | Norsk Hydro vs. SINGAPORE AIRLINES | Norsk Hydro vs. Nomad Foods | Norsk Hydro vs. SOUTHWEST AIRLINES |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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