Correlation Between Deep Value and Nordhealth

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

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

Diversification Opportunities for Deep Value and Nordhealth

-0.71

Correlation Coefficient

Deep Value  Nordhealth

Pay attention - limited upside

The 3 months correlation between Deep and Nordhealth is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Deep Value Driller and Nordhealth AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordhealth AS and Deep Value 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 Deep Value Driller are associated (or correlated) with Nordhealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordhealth AS has no effect on the direction of Deep Value i.e., Deep Value and Nordhealth go up and down completely randomly.

Pair Corralation between Deep Value and Nordhealth

Assuming the 90 days trading horizon Deep Value Driller is expected to generate 0.27 times more return on investment than Nordhealth. However, Deep Value Driller is 3.67 times less risky than Nordhealth. It trades about 0.24 of its potential returns per unit of risk. Nordhealth AS is currently generating about 0.04 per unit of risk. If you would invest  1,601  in Deep Value Driller on October 27, 2024 and sell it today you would earn a total of  107.00  from holding Deep Value Driller or generate 6.68% return on investment over 90 days.

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

Deep Value Driller  vs.  Nordhealth AS

Deep Value Driller

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deep Value Driller has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Nordhealth AS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nordhealth AS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Nordhealth displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deep Value and Nordhealth

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

The idea behind Deep Value Driller and Nordhealth AS 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.