Correlation Between Norsk Hydro and Century Aluminum
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Century Aluminum 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 Century Aluminum 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 Century Aluminum, you can compare the effects of market volatilities on Norsk Hydro and Century Aluminum 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 Century Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Century Aluminum.
Diversification Opportunities for Norsk Hydro and Century Aluminum
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Norsk and Century is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum 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 Century Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Aluminum has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Century Aluminum go up and down completely randomly.
Pair Corralation between Norsk Hydro and Century Aluminum
Assuming the 90 days horizon Norsk Hydro ASA is expected to under-perform the Century Aluminum. But the otc stock apears to be less risky and, when comparing its historical volatility, Norsk Hydro ASA is 1.21 times less risky than Century Aluminum. The otc stock trades about -0.01 of its potential returns per unit of risk. The Century Aluminum is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,709 in Century Aluminum on February 7, 2024 and sell it today you would earn a total of 31.00 from holding Century Aluminum or generate 1.81% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Norsk Hydro ASA vs. Century Aluminum
Performance |
Timeline |
Norsk Hydro ASA |
Century Aluminum |
Norsk Hydro and Century Aluminum Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Norsk Hydro and Century Aluminum
The main advantage of trading using opposite Norsk Hydro and Century Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Century Aluminum 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 Century Aluminum will offset losses from the drop in Century Aluminum's long position.Norsk Hydro vs. Kaiser Aluminum | Norsk Hydro vs. Century Aluminum | Norsk Hydro vs. Constellium Nv | Norsk Hydro vs. Alcoa Corp |
Century Aluminum vs. Kaiser Aluminum | Century Aluminum vs. Commercial Metals | Century Aluminum vs. Steel Dynamics | Century Aluminum vs. Reliance Steel Aluminum |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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