Correlation Between Norsk Hydro and TSOGO SUN

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

Diversification Opportunities for Norsk Hydro and TSOGO SUN

-0.47

Correlation Coefficient

Norsk Hydro  TSOGO SUN

Very good diversification

The 3 months correlation between Norsk and TSOGO is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and TSOGO SUN GAMING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TSOGO SUN GAMING 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 TSOGO SUN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TSOGO SUN GAMING has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and TSOGO SUN go up and down completely randomly.

Pair Corralation between Norsk Hydro and TSOGO SUN

Assuming the 90 days trading horizon Norsk Hydro is expected to generate 2.86 times less return on investment than TSOGO SUN. But when comparing it to its historical volatility, Norsk Hydro ASA is 1.92 times less risky than TSOGO SUN. It trades about 0.04 of its potential returns per unit of risk. TSOGO SUN GAMING is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  13.00  in TSOGO SUN GAMING on December 4, 2024 and sell it today you would earn a total of  32.00  from holding TSOGO SUN GAMING or generate 246.15% 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.  TSOGO SUN GAMING

Norsk Hydro ASA

Risk-Adjusted Performance

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

TSOGO SUN GAMING

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TSOGO SUN GAMING are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TSOGO SUN reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Norsk Hydro and TSOGO SUN

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

The idea behind Norsk Hydro ASA and TSOGO SUN GAMING 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.