Correlation Between Norsk Hydro and Gaztransport Technigaz
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Gaztransport Technigaz 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 Gaztransport Technigaz 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 Gaztransport Technigaz SA, you can compare the effects of market volatilities on Norsk Hydro and Gaztransport Technigaz 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 Gaztransport Technigaz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Gaztransport Technigaz.
Diversification Opportunities for Norsk Hydro and Gaztransport Technigaz
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Norsk and Gaztransport is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Gaztransport Technigaz SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaztransport Technigaz 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 Gaztransport Technigaz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaztransport Technigaz has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Gaztransport Technigaz go up and down completely randomly.
Pair Corralation between Norsk Hydro and Gaztransport Technigaz
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to under-perform the Gaztransport Technigaz. But the stock apears to be less risky and, when comparing its historical volatility, Norsk Hydro ASA is 1.08 times less risky than Gaztransport Technigaz. The stock trades about -0.33 of its potential returns per unit of risk. The Gaztransport Technigaz SA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 12,832 in Gaztransport Technigaz SA on October 6, 2024 and sell it today you would lose (72.00) from holding Gaztransport Technigaz SA or give up 0.56% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Norsk Hydro ASA vs. Gaztransport Technigaz SA
Performance |
Timeline |
Norsk Hydro ASA |
Gaztransport Technigaz |
Norsk Hydro and Gaztransport Technigaz Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Norsk Hydro and Gaztransport Technigaz
The main advantage of trading using opposite Norsk Hydro and Gaztransport Technigaz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Gaztransport Technigaz 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 Gaztransport Technigaz will offset losses from the drop in Gaztransport Technigaz's long position.Norsk Hydro vs. Spirent Communications plc | Norsk Hydro vs. Charter Communications | Norsk Hydro vs. COMPUTER MODELLING | Norsk Hydro vs. Ribbon Communications |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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