Correlation Between EAM Solar and Nordic Technology

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

By analyzing existing cross correlation between EAM Solar ASA and Nordic Technology Group, you can compare the effects of market volatilities on EAM Solar 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 EAM Solar with a short position of Nordic Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of EAM Solar and Nordic Technology.

Diversification Opportunities for EAM Solar and Nordic Technology

-0.46

Correlation Coefficient

EAM Solar  Nordic Technology

Very good diversification

The 3 months correlation between EAM and Nordic is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding EAM Solar ASA and Nordic Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Technology and EAM Solar 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 EAM Solar ASA 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 EAM Solar i.e., EAM Solar and Nordic Technology go up and down completely randomly.

Pair Corralation between EAM Solar and Nordic Technology

Assuming the 90 days trading horizon EAM Solar ASA is expected to under-perform the Nordic Technology. In addition to that, EAM Solar is 1.32 times more volatile than Nordic Technology Group. It trades about -0.2 of its total potential returns per unit of risk. Nordic Technology Group is currently generating about -0.24 per unit of volatility. If you would invest  190.00  in Nordic Technology Group on October 24, 2024 and sell it today you would lose (85.00) from holding Nordic Technology Group or give up 44.74% of portfolio value over 90 days.

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

EAM Solar ASA  vs.  Nordic Technology Group

EAM Solar ASA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EAM Solar ASA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting primary indicators, EAM Solar disclosed solid returns over the last few months and may actually be approaching a breakup point.

Nordic Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordic Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with EAM Solar and Nordic Technology

The main advantage of trading using opposite EAM Solar and Nordic Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EAM Solar 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 EAM Solar ASA 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.