Correlation Between Cytokinetics and NORSK HYDRO

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Can any of the company-specific risk be diversified away by investing in both Cytokinetics 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 Cytokinetics and NORSK HYDRO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cytokinetics and NORSK HYDRO ASA, you can compare the effects of market volatilities on Cytokinetics 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 Cytokinetics with a short position of NORSK HYDRO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cytokinetics and NORSK HYDRO.

Diversification Opportunities for Cytokinetics and NORSK HYDRO

  Correlation Coefficient

Very good diversification

The 3 months correlation between Cytokinetics and NORSK is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Cytokinetics 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 Cytokinetics 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 Cytokinetics 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 Cytokinetics i.e., Cytokinetics and NORSK HYDRO go up and down completely randomly.

Pair Corralation between Cytokinetics and NORSK HYDRO

Given the investment horizon of 90 days Cytokinetics is expected to generate 1.39 times more return on investment than NORSK HYDRO. However, Cytokinetics is 1.39 times more volatile than NORSK HYDRO ASA. It trades about 0.05 of its potential returns per unit of risk. NORSK HYDRO ASA is currently generating about 0.05 per unit of risk. If you would invest  1,988  in Cytokinetics on September 1, 2022 and sell it today you would earn a total of  2,058  from holding Cytokinetics or generate 103.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
ValuesDaily Returns

Cytokinetics  vs.  NORSK HYDRO ASA

 Performance (%) 
Cytokinetics Performance
0 of 100
Over the last 90 days Cytokinetics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2022. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Cytokinetics Price Channel

NORSK Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in NORSK HYDRO ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, NORSK HYDRO showed solid returns over the last few months and may actually be approaching a breakup point.

NORSK Price Channel

Cytokinetics and NORSK HYDRO Volatility Contrast

   Predicted Return Density   

Pair Trading with Cytokinetics and NORSK HYDRO

The main advantage of trading using opposite Cytokinetics and NORSK HYDRO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cytokinetics 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.
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The idea behind Cytokinetics 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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