Correlation Between Data Modul and Norsk Hydro

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

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

Diversification Opportunities for Data Modul and Norsk Hydro

0.27

Correlation Coefficient

Data Modul  Norsk Hydro

Modest diversification

The 3 months correlation between Data and Norsk is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Data Modul AG 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 Data Modul 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 Data Modul AG 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 Data Modul i.e., Data Modul and Norsk Hydro go up and down completely randomly.

Pair Corralation between Data Modul and Norsk Hydro

Assuming the 90 days trading horizon Data Modul AG is expected to under-perform the Norsk Hydro. But the stock apears to be less risky and, when comparing its historical volatility, Data Modul AG is 1.94 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 0.07 of returns per unit of risk over similar time horizon. If you would invest  323.00  in Norsk Hydro ASA on October 24, 2024 and sell it today you would earn a total of  246.00  from holding Norsk Hydro ASA or generate 76.16% return on investment over 90 days.

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

Data Modul AG  vs.  Norsk Hydro ASA

Data Modul AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Data Modul AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Norsk Hydro ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norsk Hydro ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Norsk Hydro is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Data Modul and Norsk Hydro

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

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.