Correlation Between Sprott Focus and NIBE Industrier

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

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

Diversification Opportunities for Sprott Focus and NIBE Industrier

-0.53

Correlation Coefficient

Sprott Focus  NIBE Industrier

Excellent diversification

The 3 months correlation between Sprott and NIBE is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Focus Trust 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 Sprott Focus 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 Sprott Focus Trust 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 Sprott Focus i.e., Sprott Focus and NIBE Industrier go up and down completely randomly.

Pair Corralation between Sprott Focus and NIBE Industrier

Given the investment horizon of 90 days Sprott Focus Trust is expected to generate 0.53 times more return on investment than NIBE Industrier. However, Sprott Focus Trust is 1.89 times less risky than NIBE Industrier. It trades about -0.1 of its potential returns per unit of risk. NIBE Industrier AB is currently generating about -0.12 per unit of risk. If you would invest  761.00  in Sprott Focus Trust on September 21, 2024 and sell it today you would lose (34.00) from holding Sprott Focus Trust or give up 4.47% of portfolio value over 90 days.

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

Sprott Focus Trust  vs.  NIBE Industrier AB

Sprott Focus Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Focus Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Sprott Focus is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

NIBE Industrier AB

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Sprott Focus and NIBE Industrier

The main advantage of trading using opposite Sprott Focus and NIBE Industrier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Focus 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 Sprott Focus Trust 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.