Correlation Between X FAB and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both X FAB 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 X FAB and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between X FAB Silicon Foundries and Norsk Hydro ASA, you can compare the effects of market volatilities on X FAB 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 X FAB with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and Norsk Hydro.
Diversification Opportunities for X FAB and Norsk Hydro
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between XFB and Norsk is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries 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 X FAB 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 X FAB Silicon Foundries 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 X FAB i.e., X FAB and Norsk Hydro go up and down completely randomly.
Pair Corralation between X FAB and Norsk Hydro
Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Norsk Hydro. But the stock apears to be less risky and, when comparing its historical volatility, X FAB Silicon Foundries is 1.15 times less risky than Norsk Hydro. The stock trades about -0.06 of its potential returns per unit of risk. The Norsk Hydro ASA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 503.00 in Norsk Hydro ASA on October 30, 2024 and sell it today you would earn a total of 47.00 from holding Norsk Hydro ASA or generate 9.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
X FAB Silicon Foundries vs. Norsk Hydro ASA
Performance |
| Timeline |
| X FAB Silicon |
| Norsk Hydro ASA |
X FAB and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X FAB and Norsk Hydro
The main advantage of trading using opposite X FAB and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB 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.| X FAB vs. Zijin Mining Group | X FAB vs. COLUMBIA SPORTSWEAR | X FAB vs. Gaztransport Technigaz SA | X FAB vs. De Grey Mining |
| Norsk Hydro vs. CHRYSALIS INVESTMENTS LTD | Norsk Hydro vs. Guangdong Investment Limited | Norsk Hydro vs. ECHO INVESTMENT ZY | Norsk Hydro vs. Apollo Investment Corp |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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