Correlation Between Norsk Hydro and Mizuno

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

Diversification Opportunities for Norsk Hydro and Mizuno

-0.47

Correlation Coefficient

Norsk Hydro  Mizuno

Very good diversification

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

Pair Corralation between Norsk Hydro and Mizuno

Assuming the 90 days trading horizon Norsk Hydro ASA is expected to under-perform the Mizuno. But the stock apears to be less risky and, when comparing its historical volatility, Norsk Hydro ASA is 1.83 times less risky than Mizuno. The stock trades about -0.24 of its potential returns per unit of risk. The Mizuno is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest  4,220  in Mizuno on September 16, 2024 and sell it today you would earn a total of  1,180  from holding Mizuno or generate 27.96% 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.  Mizuno

Norsk Hydro ASA

Risk-Adjusted Performance

4 of 100

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 uncertain technical indicators, Norsk Hydro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mizuno

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Norsk Hydro ASA and Mizuno 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.