Correlation Between Norsk Hydro and GuocoLand

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

Diversification Opportunities for Norsk Hydro and GuocoLand

0.24

Correlation Coefficient

Norsk Hydro  GuocoLand

Modest diversification

The 3 months correlation between Norsk and GuocoLand is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and GuocoLand Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GuocoLand Limited 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 GuocoLand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GuocoLand Limited has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and GuocoLand go up and down completely randomly.

Pair Corralation between Norsk Hydro and GuocoLand

Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 4.31 times more return on investment than GuocoLand. However, Norsk Hydro is 4.31 times more volatile than GuocoLand Limited. It trades about 0.05 of its potential returns per unit of risk. GuocoLand Limited is currently generating about -0.07 per unit of risk. If you would invest  572.00  in Norsk Hydro ASA on December 10, 2024 and sell it today you would earn a total of  29.00  from holding Norsk Hydro ASA or generate 5.07% return on investment over 90 days.

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

Norsk Hydro ASA  vs.  GuocoLand Limited

Norsk Hydro ASA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Norsk Hydro ASA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Norsk Hydro may actually be approaching a critical reversion point that can send shares even higher in April 2025.

GuocoLand Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days GuocoLand Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GuocoLand is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Norsk Hydro and GuocoLand

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

The idea behind Norsk Hydro ASA and GuocoLand Limited 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.