Correlation Between Norsk Hydro and Selvaag Bolig

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

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

Diversification Opportunities for Norsk Hydro and Selvaag Bolig

-0.15

Correlation Coefficient

Norsk Hydro  Selvaag Bolig

Good diversification

The 3 months correlation between Norsk and Selvaag is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Selvaag Bolig ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selvaag Bolig ASA and Norsk Hydro 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 Norsk Hydro ASA are associated (or correlated) with Selvaag Bolig. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selvaag Bolig ASA has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Selvaag Bolig go up and down completely randomly.

Pair Corralation between Norsk Hydro and Selvaag Bolig

Assuming the 90 days trading horizon Norsk Hydro ASA is expected to under-perform the Selvaag Bolig. In addition to that, Norsk Hydro is 1.73 times more volatile than Selvaag Bolig ASA. It trades about 0.0 of its total potential returns per unit of risk. Selvaag Bolig ASA is currently generating about 0.01 per unit of volatility. If you would invest  3,610  in Selvaag Bolig ASA on December 30, 2024 and sell it today you would earn a total of  25.00  from holding Selvaag Bolig ASA or generate 0.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Norsk Hydro ASA  vs.  Selvaag Bolig ASA

Norsk Hydro ASA

Risk-Adjusted Performance

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 quite persistent basic indicators, Norsk Hydro is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Selvaag Bolig ASA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Selvaag Bolig ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Selvaag Bolig is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Norsk Hydro and Selvaag Bolig

The main advantage of trading using opposite Norsk Hydro and Selvaag Bolig positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Selvaag Bolig 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 Selvaag Bolig will offset losses from the drop in Selvaag Bolig's long position.

The idea behind Norsk Hydro ASA and Selvaag Bolig 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.