Correlation Between LABOCANNA and NORTHERN OCEAN

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

By analyzing existing cross correlation between LABOCANNA SA ZY 10 and NORTHERN OCEAN LTD, you can compare the effects of market volatilities on LABOCANNA and NORTHERN OCEAN 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 LABOCANNA with a short position of NORTHERN OCEAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of LABOCANNA and NORTHERN OCEAN.

Diversification Opportunities for LABOCANNA and NORTHERN OCEAN

-0.49

Correlation Coefficient

LABOCANNA  NORTHERN OCEAN

Very good diversification

The 3 months correlation between LABOCANNA and NORTHERN is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding LABOCANNA SA ZY 10 and NORTHERN OCEAN LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHERN OCEAN LTD and LABOCANNA 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 LABOCANNA SA ZY 10 are associated (or correlated) with NORTHERN OCEAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHERN OCEAN LTD has no effect on the direction of LABOCANNA i.e., LABOCANNA and NORTHERN OCEAN go up and down completely randomly.

Pair Corralation between LABOCANNA and NORTHERN OCEAN

Assuming the 90 days horizon LABOCANNA SA ZY 10 is expected to under-perform the NORTHERN OCEAN. But the stock apears to be less risky and, when comparing its historical volatility, LABOCANNA SA ZY 10 is 2.0 times less risky than NORTHERN OCEAN. The stock trades about -0.05 of its potential returns per unit of risk. The NORTHERN OCEAN LTD is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  57.00  in NORTHERN OCEAN LTD on August 31, 2024 and sell it today you would earn a total of  10.00  from holding NORTHERN OCEAN LTD or generate 17.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

LABOCANNA SA ZY 10  vs.  NORTHERN OCEAN LTD

LABOCANNA SA ZY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LABOCANNA SA ZY 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LABOCANNA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NORTHERN OCEAN LTD

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NORTHERN OCEAN LTD are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NORTHERN OCEAN reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LABOCANNA and NORTHERN OCEAN

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

The idea behind LABOCANNA SA ZY 10 and NORTHERN OCEAN LTD 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.