Correlation Between Addtech AB and NIBE Industrier

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

By analyzing existing cross correlation between Addtech AB and NIBE Industrier AB, you can compare the effects of market volatilities on Addtech AB and NIBE Industrier 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 Addtech AB with a short position of NIBE Industrier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addtech AB and NIBE Industrier.

Diversification Opportunities for Addtech AB and NIBE Industrier

0.1

Correlation Coefficient

Addtech AB  NIBE Industrier

Average diversification

The 3 months correlation between Addtech and NIBE is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Addtech AB and NIBE Industrier AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIBE Industrier AB and Addtech AB 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 Addtech AB are associated (or correlated) with NIBE Industrier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIBE Industrier AB has no effect on the direction of Addtech AB i.e., Addtech AB and NIBE Industrier go up and down completely randomly.

Pair Corralation between Addtech AB and NIBE Industrier

Assuming the 90 days trading horizon Addtech AB is expected to generate 0.49 times more return on investment than NIBE Industrier. However, Addtech AB is 2.02 times less risky than NIBE Industrier. It trades about 0.37 of its potential returns per unit of risk. NIBE Industrier AB is currently generating about 0.04 per unit of risk. If you would invest  31,060  in Addtech AB on November 20, 2024 and sell it today you would earn a total of  3,460  from holding Addtech AB or generate 11.14% return on investment over 90 days.

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

Addtech AB  vs.  NIBE Industrier AB

Addtech AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Addtech AB are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Addtech AB sustained solid returns over the last few months and may actually be approaching a breakup point.

NIBE Industrier AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days NIBE Industrier AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, NIBE Industrier is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Addtech AB and NIBE Industrier

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

The idea behind Addtech AB and NIBE Industrier AB 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.