Correlation Between Norsk Hydro and Prosafe SE

Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Prosafe SE 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 Prosafe SE 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 Prosafe SE, you can compare the effects of market volatilities on Norsk Hydro and Prosafe SE 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 Prosafe SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Prosafe SE.

Diversification Opportunities for Norsk Hydro and Prosafe SE

0.0

Correlation Coefficient

Norsk Hydro  Prosafe SE

Pay attention - limited upside

The 3 months correlation between Norsk and Prosafe is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Prosafe SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosafe SE 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 Prosafe SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosafe SE has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Prosafe SE go up and down completely randomly.

Pair Corralation between Norsk Hydro and Prosafe SE

If you would invest (100.00) in Prosafe SE on October 4, 2024 and sell it today you would earn a total of  100.00  from holding Prosafe SE or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Norsk Hydro ASA  vs.  Prosafe SE

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 latest weak performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Prosafe SE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Norsk Hydro and Prosafe SE

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

The idea behind Norsk Hydro ASA and Prosafe SE 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.