Correlation Between VULCAN MATERIALS and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both VULCAN MATERIALS 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 VULCAN MATERIALS and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VULCAN MATERIALS and Norsk Hydro ASA, you can compare the effects of market volatilities on VULCAN MATERIALS 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 VULCAN MATERIALS with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of VULCAN MATERIALS and Norsk Hydro.
Diversification Opportunities for VULCAN MATERIALS and Norsk Hydro
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between VULCAN and Norsk is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS 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 VULCAN MATERIALS 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 VULCAN MATERIALS 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 VULCAN MATERIALS i.e., VULCAN MATERIALS and Norsk Hydro go up and down completely randomly.
Pair Corralation between VULCAN MATERIALS and Norsk Hydro
Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 1.93 times less return on investment than Norsk Hydro. But when comparing it to its historical volatility, VULCAN MATERIALS is 1.73 times less risky than Norsk Hydro. It trades about 0.18 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 527.00 in Norsk Hydro ASA on October 25, 2024 and sell it today you would earn a total of 38.00 from holding Norsk Hydro ASA or generate 7.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.44% |
| Values | Daily Returns |
VULCAN MATERIALS vs. Norsk Hydro ASA
Performance |
| Timeline |
| VULCAN MATERIALS |
| Norsk Hydro ASA |
VULCAN MATERIALS and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VULCAN MATERIALS and Norsk Hydro
The main advantage of trading using opposite VULCAN MATERIALS and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VULCAN MATERIALS 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.| VULCAN MATERIALS vs. Apple Inc | VULCAN MATERIALS vs. Apple Inc | VULCAN MATERIALS vs. Apple Inc | VULCAN MATERIALS vs. Apple Inc |
| Norsk Hydro vs. Check Point Software | Norsk Hydro vs. VULCAN MATERIALS | Norsk Hydro vs. Summit Materials | Norsk Hydro vs. Casio Computer CoLtd |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |