Correlation Between Norsk Hydro and Welltower

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

Diversification Opportunities for Norsk Hydro and Welltower

0.52

Correlation Coefficient

Norsk Hydro  Welltower

Very weak diversification

The 3 months correlation between Norsk and Welltower is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Welltower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welltower 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 Welltower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welltower has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Welltower go up and down completely randomly.

Pair Corralation between Norsk Hydro and Welltower

Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 2.21 times more return on investment than Welltower. However, Norsk Hydro is 2.21 times more volatile than Welltower. It trades about 0.11 of its potential returns per unit of risk. Welltower is currently generating about 0.08 per unit of risk. If you would invest  480.00  in Norsk Hydro ASA on September 12, 2024 and sell it today you would earn a total of  92.00  from holding Norsk Hydro ASA or generate 19.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Norsk Hydro ASA  vs.  Welltower

Norsk Hydro ASA

Risk-Adjusted Performance

8 of 100

OK

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

Welltower

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Welltower may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Norsk Hydro and Welltower

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

The idea behind Norsk Hydro ASA and Welltower 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.