Correlation Between Yara International and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Yara International 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 Yara International and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yara International ASA and Norsk Hydro ASA, you can compare the effects of market volatilities on Yara International 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 Yara International with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yara International and Norsk Hydro.
Diversification Opportunities for Yara International and Norsk Hydro
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Yara and Norsk is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Yara International 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 Yara International 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 Yara International 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 Yara International i.e., Yara International and Norsk Hydro go up and down completely randomly.
Pair Corralation between Yara International and Norsk Hydro
Assuming the 90 days trading horizon Yara International ASA is expected to under-perform the Norsk Hydro. But the stock apears to be less risky and, when comparing its historical volatility, Yara International ASA is 1.88 times less risky than Norsk Hydro. The stock trades about -0.14 of its potential returns per unit of risk. The Norsk Hydro ASA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 6,766 in Norsk Hydro ASA on August 25, 2024 and sell it today you would earn a total of 382.00 from holding Norsk Hydro ASA or generate 5.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yara International ASA vs. Norsk Hydro ASA
Performance |
| Timeline |
| Yara International ASA |
| Norsk Hydro ASA |
Yara International and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yara International and Norsk Hydro
The main advantage of trading using opposite Yara International and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yara International 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.| Yara International vs. Telenor ASA | Yara International vs. Orkla ASA | Yara International vs. DnB ASA | Yara International 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |