Correlation Between Neinor Homes and Transurban

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

By analyzing existing cross correlation between Neinor Homes SA and Transurban Group, you can compare the effects of market volatilities on Neinor Homes and Transurban 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 Neinor Homes with a short position of Transurban. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neinor Homes and Transurban.

Diversification Opportunities for Neinor Homes and Transurban

-0.55

Correlation Coefficient

Neinor Homes  Transurban

Excellent diversification

The 3 months correlation between Neinor and Transurban is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Neinor Homes SA and Transurban Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transurban Group and Neinor Homes 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 Neinor Homes SA are associated (or correlated) with Transurban. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transurban Group has no effect on the direction of Neinor Homes i.e., Neinor Homes and Transurban go up and down completely randomly.

Pair Corralation between Neinor Homes and Transurban

Assuming the 90 days trading horizon Neinor Homes SA is expected to generate 1.37 times more return on investment than Transurban. However, Neinor Homes is 1.37 times more volatile than Transurban Group. It trades about 0.22 of its potential returns per unit of risk. Transurban Group is currently generating about 0.01 per unit of risk. If you would invest  1,502  in Neinor Homes SA on September 24, 2024 and sell it today you would earn a total of  100.00  from holding Neinor Homes SA or generate 6.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Neinor Homes SA  vs.  Transurban Group

Neinor Homes SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Neinor Homes SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Neinor Homes unveiled solid returns over the last few months and may actually be approaching a breakup point.

Transurban Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transurban Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Transurban is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Neinor Homes and Transurban

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

The idea behind Neinor Homes SA and Transurban 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.