Correlation Between Advanced Medical and Norsk Hydro

Can any of the company-specific risk be diversified away by investing in both Advanced Medical 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 Advanced Medical and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Advanced Medical Solutions and Norsk Hydro ASA, you can compare the effects of market volatilities on Advanced Medical 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 Advanced Medical with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Medical and Norsk Hydro.

Diversification Opportunities for Advanced Medical and Norsk Hydro

0.28

Correlation Coefficient

Advanced Medical  Norsk Hydro

Modest diversification

The 3 months correlation between Advanced and Norsk is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Medical Solutions 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 Advanced Medical 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 Advanced Medical Solutions 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 Advanced Medical i.e., Advanced Medical and Norsk Hydro go up and down completely randomly.

Pair Corralation between Advanced Medical and Norsk Hydro

Assuming the 90 days trading horizon Advanced Medical is expected to generate 26.82 times less return on investment than Norsk Hydro. But when comparing it to its historical volatility, Advanced Medical Solutions is 1.0 times less risky than Norsk Hydro. It trades about 0.0 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  515.00  in Norsk Hydro ASA on December 21, 2024 and sell it today you would earn a total of  60.00  from holding Norsk Hydro ASA or generate 11.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Advanced Medical Solutions  vs.  Norsk Hydro ASA

Advanced Medical Sol

Risk-Adjusted Performance

Weak

Over the last 90 days Advanced Medical Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Advanced Medical is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Norsk Hydro ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Norsk Hydro ASA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Norsk Hydro reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Medical and Norsk Hydro

The main advantage of trading using opposite Advanced Medical and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Medical 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.

The idea behind Advanced Medical Solutions and Norsk Hydro ASA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 CEOs Directory module to screen CEOs from public companies around the world.