Correlation Between Norsk Hydro and Aena SME
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Aena SME 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 Aena SME 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 Aena SME SA, you can compare the effects of market volatilities on Norsk Hydro and Aena SME 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 Aena SME. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Aena SME.
Diversification Opportunities for Norsk Hydro and Aena SME
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and Aena is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Aena SME SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aena SME SA 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 Aena SME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aena SME SA has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Aena SME go up and down completely randomly.
Pair Corralation between Norsk Hydro and Aena SME
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 2.89 times more return on investment than Aena SME. However, Norsk Hydro is 2.89 times more volatile than Aena SME SA. It trades about 0.12 of its potential returns per unit of risk. Aena SME SA is currently generating about 0.09 per unit of risk. If you would invest 480.00 in Norsk Hydro ASA on September 12, 2024 and sell it today you would earn a total of 108.00 from holding Norsk Hydro ASA or generate 22.5% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Norsk Hydro ASA vs. Aena SME SA
Performance |
Timeline |
Norsk Hydro ASA |
Aena SME SA |
Norsk Hydro and Aena SME Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Norsk Hydro and Aena SME
The main advantage of trading using opposite Norsk Hydro and Aena SME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Aena SME 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 Aena SME will offset losses from the drop in Aena SME's long position.Norsk Hydro vs. Aluminum of | Norsk Hydro vs. Kaiser Aluminum | Norsk Hydro vs. Superior Plus Corp | Norsk Hydro vs. SIVERS SEMICONDUCTORS AB |
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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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