Correlation Between Telenor ASA and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Telenor ASA 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 Telenor ASA and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telenor ASA and Norsk Hydro ASA, you can compare the effects of market volatilities on Telenor ASA 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 Telenor ASA with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telenor ASA and Norsk Hydro.
Diversification Opportunities for Telenor ASA and Norsk Hydro
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Telenor and Norsk is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Telenor ASA 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 Telenor ASA 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 Telenor ASA 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 Telenor ASA i.e., Telenor ASA and Norsk Hydro go up and down completely randomly.
Pair Corralation between Telenor ASA and Norsk Hydro
Assuming the 90 days trading horizon Telenor ASA is expected to generate 0.51 times more return on investment than Norsk Hydro. However, Telenor ASA is 1.96 times less risky than Norsk Hydro. It trades about 0.07 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.03 per unit of risk. If you would invest 10,886 in Telenor ASA on August 25, 2024 and sell it today you would earn a total of 2,324 from holding Telenor ASA or generate 21.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telenor ASA vs. Norsk Hydro ASA
Performance |
| Timeline |
| Telenor ASA |
| Norsk Hydro ASA |
Telenor ASA and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telenor ASA and Norsk Hydro
The main advantage of trading using opposite Telenor ASA and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telenor ASA 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.| Telenor ASA vs. Orkla ASA | Telenor ASA vs. DnB ASA | Telenor ASA vs. Yara International ASA | Telenor ASA vs. Storebrand ASA |
| Norsk Hydro vs. Yara International ASA | Norsk Hydro vs. Equinor ASA | Norsk Hydro vs. Telenor ASA | Norsk Hydro vs. Orkla ASA |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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