Correlation Between Norsk Hydro and Uber Technologies

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

Diversification Opportunities for Norsk Hydro and Uber Technologies

0.3

Correlation Coefficient

Norsk Hydro  Uber Technologies

Weak diversification

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

Pair Corralation between Norsk Hydro and Uber Technologies

Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 0.88 times more return on investment than Uber Technologies. However, Norsk Hydro ASA is 1.14 times less risky than Uber Technologies. It trades about 0.01 of its potential returns per unit of risk. Uber Technologies is currently generating about -0.05 per unit of risk. If you would invest  527.00  in Norsk Hydro ASA on September 22, 2024 and sell it today you would lose (3.00) from holding Norsk Hydro ASA or give up 0.57% of portfolio value over 90 days.

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

Norsk Hydro ASA  vs.  Uber Technologies

Norsk Hydro ASA

Risk-Adjusted Performance

0 of 100

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 nearly stable technical indicators, Norsk Hydro is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Uber Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Uber Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Norsk Hydro and Uber Technologies

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

The idea behind Norsk Hydro ASA and Uber Technologies 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.