Correlation Between Norsk Hydro and Alibaba Health

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

Diversification Opportunities for Norsk Hydro and Alibaba Health

0.56

Correlation Coefficient

Norsk Hydro  Alibaba Health

Very weak diversification

The 3 months correlation between Norsk and Alibaba is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Alibaba Health Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Health Infor 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 Alibaba Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Health Infor has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Alibaba Health go up and down completely randomly.

Pair Corralation between Norsk Hydro and Alibaba Health

Assuming the 90 days trading horizon Norsk Hydro is expected to generate 4.7 times less return on investment than Alibaba Health. But when comparing it to its historical volatility, Norsk Hydro ASA is 2.32 times less risky than Alibaba Health. It trades about 0.08 of its potential returns per unit of risk. Alibaba Health Information is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Alibaba Health Information on December 22, 2024 and sell it today you would earn a total of  22.00  from holding Alibaba Health Information or generate 52.38% return on investment over 90 days.

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

Norsk Hydro ASA  vs.  Alibaba Health Information

Norsk Hydro ASA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Norsk Hydro ASA are ranked lower than 6 (%) 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.

Alibaba Health Infor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Health Information are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alibaba Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Norsk Hydro and Alibaba Health

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

The idea behind Norsk Hydro ASA and Alibaba Health Information 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.