Correlation Between Norsk Hydro and Comcast

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

Diversification Opportunities for Norsk Hydro and Comcast

0.59

Correlation Coefficient

Norsk Hydro  Comcast

Very weak diversification

The 3 months correlation between Norsk and Comcast is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Comcast in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comcast 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 Comcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comcast has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Comcast go up and down completely randomly.

Pair Corralation between Norsk Hydro and Comcast

Assuming the 90 days trading horizon Norsk Hydro ASA is expected to under-perform the Comcast. But the stock apears to be less risky and, when comparing its historical volatility, Norsk Hydro ASA is 1.58 times less risky than Comcast. The stock trades about -0.36 of its potential returns per unit of risk. The Comcast is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  4,010  in Comcast on October 7, 2024 and sell it today you would lose (317.00) from holding Comcast or give up 7.91% 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.  Comcast

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 uncertain 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.

Comcast

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Comcast has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Comcast 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 Comcast

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

The idea behind Norsk Hydro ASA and Comcast 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.