Correlation Between Norsk Hydro and Daldrup Söhne

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

Diversification Opportunities for Norsk Hydro and Daldrup Söhne

-0.49

Correlation Coefficient

Norsk Hydro  Daldrup Söhne

Very good diversification

The 3 months correlation between Norsk and Daldrup is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Daldrup Shne Aktiengesellschaf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daldrup Shne Aktieng 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 Daldrup Söhne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daldrup Shne Aktieng has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Daldrup Söhne go up and down completely randomly.

Pair Corralation between Norsk Hydro and Daldrup Söhne

Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 0.73 times more return on investment than Daldrup Söhne. However, Norsk Hydro ASA is 1.38 times less risky than Daldrup Söhne. It trades about -0.01 of its potential returns per unit of risk. Daldrup Shne Aktiengesellschaft is currently generating about -0.01 per unit of risk. If you would invest  587.00  in Norsk Hydro ASA on November 29, 2024 and sell it today you would lose (11.00) from holding Norsk Hydro ASA or give up 1.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Norsk Hydro ASA  vs.  Daldrup Shne Aktiengesellschaf

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 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.

Daldrup Shne Aktieng

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Norsk Hydro and Daldrup Söhne

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

The idea behind Norsk Hydro ASA and Daldrup Shne Aktiengesellschaft 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.