Correlation Between KASPIKZ 1 and Norsk Hydro

Can any of the company-specific risk be diversified away by investing in both KASPIKZ 1 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 KASPIKZ 1 and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KASPIKZ 1 and Norsk Hydro ASA, you can compare the effects of market volatilities on KASPIKZ 1 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 KASPIKZ 1 with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of KASPIKZ 1 and Norsk Hydro.

Diversification Opportunities for KASPIKZ 1 and Norsk Hydro

0.24

Correlation Coefficient

KASPIKZ 1  Norsk Hydro

Modest diversification

The 3 months correlation between KASPIKZ and Norsk is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding KASPIKZ 1 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 KASPIKZ 1 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 KASPIKZ 1 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 KASPIKZ 1 i.e., KASPIKZ 1 and Norsk Hydro go up and down completely randomly.

Pair Corralation between KASPIKZ 1 and Norsk Hydro

Assuming the 90 days horizon KASPIKZ 1 is expected to under-perform the Norsk Hydro. In addition to that, KASPIKZ 1 is 1.14 times more volatile than Norsk Hydro ASA. It trades about -0.03 of its total potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.07 per unit of volatility. If you would invest  479.00  in Norsk Hydro ASA on December 10, 2024 and sell it today you would earn a total of  99.00  from holding Norsk Hydro ASA or generate 20.67% return on investment over 90 days.

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

KASPIKZ 1  vs.  Norsk Hydro ASA

KASPIKZ 1

Risk-Adjusted Performance

Very Weak

Over the last 90 days KASPIKZ 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Norsk Hydro ASA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Norsk Hydro ASA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Norsk Hydro may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with KASPIKZ 1 and Norsk Hydro

The main advantage of trading using opposite KASPIKZ 1 and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KASPIKZ 1 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 KASPIKZ 1 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.