Correlation Between Norsk Hydro and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Sterling Construction 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 Sterling Construction 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 Sterling Construction, you can compare the effects of market volatilities on Norsk Hydro and Sterling Construction 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 Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Sterling Construction.
Diversification Opportunities for Norsk Hydro and Sterling Construction
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Norsk and Sterling is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction 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 Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Sterling Construction go up and down completely randomly.
Pair Corralation between Norsk Hydro and Sterling Construction
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 0.39 times more return on investment than Sterling Construction. However, Norsk Hydro ASA is 2.56 times less risky than Sterling Construction. It trades about -0.02 of its potential returns per unit of risk. Sterling Construction is currently generating about -0.12 per unit of risk. If you would invest 586.00 in Norsk Hydro ASA on December 2, 2024 and sell it today you would lose (18.00) from holding Norsk Hydro ASA or give up 3.07% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Norsk Hydro ASA vs. Sterling Construction
Performance |
Timeline |
Norsk Hydro ASA |
Sterling Construction |
Norsk Hydro and Sterling Construction Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Norsk Hydro and Sterling Construction
The main advantage of trading using opposite Norsk Hydro and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Sterling Construction 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 Sterling Construction will offset losses from the drop in Sterling Construction's long position.Norsk Hydro vs. Xiwang Special Steel | Norsk Hydro vs. Grupo Carso SAB | Norsk Hydro vs. Motorcar Parts of | Norsk Hydro vs. GEELY AUTOMOBILE |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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