Correlation Between PHI and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both PHI 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 PHI and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PHI Group and Norsk Hydro ASA, you can compare the effects of market volatilities on PHI 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 PHI with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of PHI and Norsk Hydro.
Diversification Opportunities for PHI and Norsk Hydro
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between PHI and Norsk is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding PHI Group 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 PHI 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 PHI Group 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 PHI i.e., PHI and Norsk Hydro go up and down completely randomly.
Pair Corralation between PHI and Norsk Hydro
Given the investment horizon of 90 days PHI Group is expected to generate 12.59 times more return on investment than Norsk Hydro. However, PHI is 12.59 times more volatile than Norsk Hydro ASA. It trades about 0.15 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.13 per unit of risk. If you would invest 0.02 in PHI Group on August 28, 2024 and sell it today you would lose (0.01) from holding PHI Group or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PHI Group vs. Norsk Hydro ASA
Performance |
| Timeline |
| PHI Group |
| Norsk Hydro ASA |
PHI and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PHI and Norsk Hydro
The main advantage of trading using opposite PHI and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PHI 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.| PHI vs. Morgan Stanley | PHI vs. Goldman Sachs Group | PHI vs. Charles Schwab Corp | PHI vs. Interactive Brokers Group |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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