Correlation Between Deep Value and Nordic Technology

Can any of the company-specific risk be diversified away by investing in both Deep Value and Nordic Technology 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 Nordic Technology 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 Nordic Technology Group, you can compare the effects of market volatilities on Deep Value and Nordic Technology 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 Nordic Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deep Value and Nordic Technology.

Diversification Opportunities for Deep Value and Nordic Technology

-0.04

Correlation Coefficient

Deep Value  Nordic Technology

Good diversification

The 3 months correlation between Deep and Nordic is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Deep Value Driller and Nordic Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Technology 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 Nordic Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Technology has no effect on the direction of Deep Value i.e., Deep Value and Nordic Technology go up and down completely randomly.

Pair Corralation between Deep Value and Nordic Technology

Assuming the 90 days trading horizon Deep Value is expected to generate 2.81 times less return on investment than Nordic Technology. But when comparing it to its historical volatility, Deep Value Driller is 2.58 times less risky than Nordic Technology. It trades about 0.04 of its potential returns per unit of risk. Nordic Technology Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  190.00  in Nordic Technology Group on December 19, 2024 and sell it today you would lose (20.00) from holding Nordic Technology Group or give up 10.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Deep Value Driller  vs.  Nordic Technology Group

Deep Value Driller

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Deep Value Driller are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Deep Value disclosed solid returns over the last few months and may actually be approaching a breakup point.

Nordic Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Technology Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Nordic Technology disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deep Value and Nordic Technology

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

The idea behind Deep Value Driller and Nordic Technology Group 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.