Correlation Between Norsk Hydro and CeoTronics

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

Diversification Opportunities for Norsk Hydro and CeoTronics

0.0

Correlation Coefficient

Norsk Hydro  CeoTronics

Pay attention - limited upside

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

Pair Corralation between Norsk Hydro and CeoTronics

Assuming the 90 days trading horizon Norsk Hydro ASA is expected to under-perform the CeoTronics. But the stock apears to be less risky and, when comparing its historical volatility, Norsk Hydro ASA is 1.17 times less risky than CeoTronics. The stock trades about -0.02 of its potential returns per unit of risk. The CeoTronics AG is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  516.00  in CeoTronics AG on September 25, 2024 and sell it today you would earn a total of  74.00  from holding CeoTronics AG or generate 14.34% return on investment over 90 days.

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

Norsk Hydro ASA  vs.  CeoTronics AG

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 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.

CeoTronics AG

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CeoTronics AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward-looking signals, CeoTronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Norsk Hydro and CeoTronics

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

The idea behind Norsk Hydro ASA and CeoTronics AG 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.