Correlation Between Seven West and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Seven West 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 Seven West and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seven West Media and Norsk Hydro ASA, you can compare the effects of market volatilities on Seven West 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 Seven West with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seven West and Norsk Hydro.
Diversification Opportunities for Seven West and Norsk Hydro
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Seven and Norsk is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Seven West Media 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 Seven West 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 Seven West Media 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 Seven West i.e., Seven West and Norsk Hydro go up and down completely randomly.
Pair Corralation between Seven West and Norsk Hydro
Assuming the 90 days horizon Seven West Media is expected to generate 2.09 times more return on investment than Norsk Hydro. However, Seven West is 2.09 times more volatile than Norsk Hydro ASA. It trades about -0.01 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about -0.02 per unit of risk. If you would invest 9.85 in Seven West Media on September 22, 2024 and sell it today you would lose (2.05) from holding Seven West Media or give up 20.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seven West Media vs. Norsk Hydro ASA
Performance |
| Timeline |
| Seven West Media |
| Norsk Hydro ASA |
Seven West and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seven West and Norsk Hydro
The main advantage of trading using opposite Seven West and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seven West 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.| Seven West vs. Live Nation Entertainment | Seven West vs. Superior Plus Corp | Seven West vs. NMI Holdings | Seven West vs. SIVERS SEMICONDUCTORS AB |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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