Correlation Between NORDIC HALIBUT and China Reinsurance

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

By analyzing existing cross correlation between NORDIC HALIBUT AS and China Reinsurance, you can compare the effects of market volatilities on NORDIC HALIBUT and China Reinsurance 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 NORDIC HALIBUT with a short position of China Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORDIC HALIBUT and China Reinsurance.

Diversification Opportunities for NORDIC HALIBUT and China Reinsurance

0.07

Correlation Coefficient

NORDIC HALIBUT  China Reinsurance

Significant diversification

The 3 months correlation between NORDIC and China is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NORDIC HALIBUT AS and China Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Reinsurance and NORDIC HALIBUT 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 NORDIC HALIBUT AS are associated (or correlated) with China Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Reinsurance has no effect on the direction of NORDIC HALIBUT i.e., NORDIC HALIBUT and China Reinsurance go up and down completely randomly.

Pair Corralation between NORDIC HALIBUT and China Reinsurance

Assuming the 90 days horizon NORDIC HALIBUT is expected to generate 12.56 times less return on investment than China Reinsurance. But when comparing it to its historical volatility, NORDIC HALIBUT AS is 4.11 times less risky than China Reinsurance. It trades about 0.02 of its potential returns per unit of risk. China Reinsurance is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  10.00  in China Reinsurance on December 28, 2024 and sell it today you would earn a total of  2.00  from holding China Reinsurance or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

NORDIC HALIBUT AS  vs.  China Reinsurance

NORDIC HALIBUT AS

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NORDIC HALIBUT AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NORDIC HALIBUT is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

China Reinsurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Reinsurance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Reinsurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NORDIC HALIBUT and China Reinsurance

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

The idea behind NORDIC HALIBUT AS and China Reinsurance 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.