Correlation Between Veren and Norsk Hydro

Can any of the company-specific risk be diversified away by investing in both Veren and Norsk Hydro 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 Veren and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Veren Inc and Norsk Hydro ASA, you can compare the effects of market volatilities on Veren and Norsk Hydro 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 Veren with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veren and Norsk Hydro.

Diversification Opportunities for Veren and Norsk Hydro

0.0

Correlation Coefficient

Veren  Norsk Hydro

Pay attention - limited upside

The 3 months correlation between Veren and Norsk is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Veren Inc and Norsk Hydro ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsk Hydro ASA and Veren 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 Veren Inc are associated (or correlated) with Norsk Hydro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norsk Hydro ASA has no effect on the direction of Veren i.e., Veren and Norsk Hydro go up and down completely randomly.

Pair Corralation between Veren and Norsk Hydro

If you would invest  500.00  in Veren Inc on December 28, 2024 and sell it today you would earn a total of  170.00  from holding Veren Inc or generate 34.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Veren Inc  vs.  Norsk Hydro ASA

Veren Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Veren Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Veren displayed solid returns over the last few months and may actually be approaching a breakup point.

Norsk Hydro ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Norsk Hydro ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Norsk Hydro is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Veren and Norsk Hydro

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

The idea behind Veren Inc and Norsk Hydro ASA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.