Correlation Between NEL ASA and FIRST NATIONAL

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

By analyzing existing cross correlation between NEL ASA ADR30 and FIRST NATIONAL FIN, you can compare the effects of market volatilities on NEL ASA and FIRST NATIONAL 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 NEL ASA with a short position of FIRST NATIONAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEL ASA and FIRST NATIONAL.

Diversification Opportunities for NEL ASA and FIRST NATIONAL

-0.36

Correlation Coefficient

NEL ASA  FIRST NATIONAL

Very good diversification

The 3 months correlation between NEL and FIRST is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding NEL ASA ADR30 and FIRST NATIONAL FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST NATIONAL FIN and NEL ASA 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 NEL ASA ADR30 are associated (or correlated) with FIRST NATIONAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRST NATIONAL FIN has no effect on the direction of NEL ASA i.e., NEL ASA and FIRST NATIONAL go up and down completely randomly.

Pair Corralation between NEL ASA and FIRST NATIONAL

Assuming the 90 days trading horizon NEL ASA ADR30 is expected to generate 5.97 times more return on investment than FIRST NATIONAL. However, NEL ASA is 5.97 times more volatile than FIRST NATIONAL FIN. It trades about 0.04 of its potential returns per unit of risk. FIRST NATIONAL FIN is currently generating about -0.02 per unit of risk. If you would invest  695.00  in NEL ASA ADR30 on December 25, 2024 and sell it today you would earn a total of  5.00  from holding NEL ASA ADR30 or generate 0.72% return on investment over 90 days.

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

NEL ASA ADR30  vs.  FIRST NATIONAL FIN

NEL ASA ADR30

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NEL ASA ADR30 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, NEL ASA reported solid returns over the last few months and may actually be approaching a breakup point.

FIRST NATIONAL FIN

Risk-Adjusted Performance

Very Weak

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

Pair Trading with NEL ASA and FIRST NATIONAL

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

The idea behind NEL ASA ADR30 and FIRST NATIONAL FIN 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.