Correlation Between Norsk Hydro and Lerøy Seafood

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

Diversification Opportunities for Norsk Hydro and Lerøy Seafood

0.51

Correlation Coefficient

Norsk Hydro  Lerøy Seafood

Very weak diversification

The 3 months correlation between Norsk and Lerøy is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Lery Seafood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lery Seafood Group 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 Lerøy Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lery Seafood Group has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Lerøy Seafood go up and down completely randomly.

Pair Corralation between Norsk Hydro and Lerøy Seafood

Assuming the 90 days trading horizon Norsk Hydro ASA is expected to under-perform the Lerøy Seafood. But the stock apears to be less risky and, when comparing its historical volatility, Norsk Hydro ASA is 1.18 times less risky than Lerøy Seafood. The stock trades about -0.24 of its potential returns per unit of risk. The Lery Seafood Group is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  416.00  in Lery Seafood Group on September 16, 2024 and sell it today you would earn a total of  34.00  from holding Lery Seafood Group or generate 8.17% 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.  Lery Seafood Group

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

Lery Seafood Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lery Seafood Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lerøy Seafood may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Norsk Hydro and Lerøy Seafood

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

The idea behind Norsk Hydro ASA and Lery Seafood Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.