Correlation Between Norsk Hydro and Datalogic SpA

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

Diversification Opportunities for Norsk Hydro and Datalogic SpA

-0.59

Correlation Coefficient

Norsk Hydro  Datalogic SpA

Excellent diversification

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

Pair Corralation between Norsk Hydro and Datalogic SpA

Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 2.08 times more return on investment than Datalogic SpA. However, Norsk Hydro is 2.08 times more volatile than Datalogic SpA. It trades about 0.03 of its potential returns per unit of risk. Datalogic SpA is currently generating about -0.08 per unit of risk. If you would invest  581.00  in Norsk Hydro ASA on September 12, 2024 and sell it today you would earn a total of  7.00  from holding Norsk Hydro ASA or generate 1.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Norsk Hydro ASA  vs.  Datalogic SpA

Norsk Hydro ASA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Norsk Hydro ASA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Norsk Hydro reported solid returns over the last few months and may actually be approaching a breakup point.

Datalogic SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Datalogic SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Norsk Hydro and Datalogic SpA

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

The idea behind Norsk Hydro ASA and Datalogic SpA 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.