Correlation Between PSI Software and Norsk Hydro
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By analyzing existing cross correlation between PSI Software AG and Norsk Hydro ASA, you can compare the effects of market volatilities on PSI Software 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 PSI Software with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of PSI Software and Norsk Hydro.
Diversification Opportunities for PSI Software and Norsk Hydro
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PSI and Norsk is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding PSI Software AG 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 PSI Software 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 PSI Software AG 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 PSI Software i.e., PSI Software and Norsk Hydro go up and down completely randomly.
Pair Corralation between PSI Software and Norsk Hydro
Assuming the 90 days trading horizon PSI Software AG is expected to under-perform the Norsk Hydro. But the stock apears to be less risky and, when comparing its historical volatility, PSI Software AG is 2.43 times less risky than Norsk Hydro. The stock trades about -0.07 of its potential returns per unit of risk. The Norsk Hydro ASA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 560.00 in Norsk Hydro ASA on August 29, 2024 and sell it today you would earn a total of 45.00 from holding Norsk Hydro ASA or generate 8.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
PSI Software AG vs. Norsk Hydro ASA
Performance |
| Timeline |
| PSI Software AG |
| Norsk Hydro ASA |
PSI Software and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PSI Software and Norsk Hydro
The main advantage of trading using opposite PSI Software and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PSI Software 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.The idea behind PSI Software AG and Norsk Hydro ASA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Norsk Hydro vs. Superior Plus Corp | Norsk Hydro vs. NMI Holdings | Norsk Hydro vs. SIVERS SEMICONDUCTORS AB | Norsk Hydro vs. Talanx AG |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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