Correlation Between Zenith Energy and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Zenith Energy 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 Zenith Energy and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zenith Energy and Norsk Hydro ASA, you can compare the effects of market volatilities on Zenith Energy 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 Zenith Energy with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zenith Energy and Norsk Hydro.
Diversification Opportunities for Zenith Energy and Norsk Hydro
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Zenith and Norsk is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Zenith Energy 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 Zenith Energy 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 Zenith Energy 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 Zenith Energy i.e., Zenith Energy and Norsk Hydro go up and down completely randomly.
Pair Corralation between Zenith Energy and Norsk Hydro
Assuming the 90 days trading horizon Zenith Energy is expected to generate 1.88 times more return on investment than Norsk Hydro. However, Zenith Energy is 1.88 times more volatile than Norsk Hydro ASA. It trades about 0.13 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 17.00 in Zenith Energy on September 3, 2024 and sell it today you would earn a total of 2.00 from holding Zenith Energy or generate 11.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zenith Energy vs. Norsk Hydro ASA
Performance |
| Timeline |
| Zenith Energy |
| Norsk Hydro ASA |
Zenith Energy and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zenith Energy and Norsk Hydro
The main advantage of trading using opposite Zenith Energy and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zenith Energy 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.| Zenith Energy vs. Kongsberg Automotive Holding | Zenith Energy vs. Questerre Energy | Zenith Energy vs. Okea ASA | Zenith Energy vs. Hunter Group 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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