Correlation Between Norsk Hydro and SES SA

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

Diversification Opportunities for Norsk Hydro and SES SA

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Norsk and SES is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and SES SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SES SA 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 SES SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SES SA has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and SES SA go up and down completely randomly.

Pair Corralation between Norsk Hydro and SES SA

Assuming the 90 days trading horizon Norsk Hydro ASA is expected to under-perform the SES SA. But the stock apears to be less risky and, when comparing its historical volatility, Norsk Hydro ASA is 1.41 times less risky than SES SA. The stock trades about -0.55 of its potential returns per unit of risk. The SES SA is currently generating about -0.27 of returns per unit of risk over similar time horizon. If you would invest  319.00  in SES SA on October 4, 2024 and sell it today you would lose (25.00) from holding SES SA or give up 7.84% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Norsk Hydro ASA  vs.  SES SA

 Performance 
       Timeline  
Norsk Hydro ASA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest uncertain performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
SES SA 

Risk-Adjusted Performance

0 of 100

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

Norsk Hydro and SES SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Norsk Hydro and SES SA

The main advantage of trading using opposite Norsk Hydro and SES SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, SES SA 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 SES SA will offset losses from the drop in SES SA's long position.
The idea behind Norsk Hydro ASA and SES SA 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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