Correlation Between Norsk Hydro and PLAYTIKA HOLDING

Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and PLAYTIKA HOLDING 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 PLAYTIKA HOLDING 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 PLAYTIKA HOLDING DL 01, you can compare the effects of market volatilities on Norsk Hydro and PLAYTIKA HOLDING 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 PLAYTIKA HOLDING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and PLAYTIKA HOLDING.

Diversification Opportunities for Norsk Hydro and PLAYTIKA HOLDING

0.44

Correlation Coefficient

Norsk Hydro  PLAYTIKA HOLDING

Very weak diversification

The 3 months correlation between Norsk and PLAYTIKA is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and PLAYTIKA HOLDING DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYTIKA HOLDING 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 PLAYTIKA HOLDING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYTIKA HOLDING has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and PLAYTIKA HOLDING go up and down completely randomly.

Pair Corralation between Norsk Hydro and PLAYTIKA HOLDING

Assuming the 90 days trading horizon Norsk Hydro is expected to generate 1.34 times less return on investment than PLAYTIKA HOLDING. In addition to that, Norsk Hydro is 1.39 times more volatile than PLAYTIKA HOLDING DL 01. It trades about 0.05 of its total potential returns per unit of risk. PLAYTIKA HOLDING DL 01 is currently generating about 0.1 per unit of volatility. If you would invest  690.00  in PLAYTIKA HOLDING DL 01 on September 18, 2024 and sell it today you would earn a total of  85.00  from holding PLAYTIKA HOLDING DL 01 or generate 12.32% 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.  PLAYTIKA HOLDING DL 01

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.

PLAYTIKA HOLDING

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PLAYTIKA HOLDING DL 01 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PLAYTIKA HOLDING reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Norsk Hydro and PLAYTIKA HOLDING

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

The idea behind Norsk Hydro ASA and PLAYTIKA HOLDING DL 01 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.