Correlation Between Neinor Homes and Tier1 Technology

Can any of the company-specific risk be diversified away by investing in both Neinor Homes and Tier1 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 Neinor Homes and Tier1 Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Neinor Homes SLU and Tier1 Technology SA, you can compare the effects of market volatilities on Neinor Homes and Tier1 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 Neinor Homes with a short position of Tier1 Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neinor Homes and Tier1 Technology.

Diversification Opportunities for Neinor Homes and Tier1 Technology

0.61

Correlation Coefficient

Neinor Homes  Tier1 Technology

Poor diversification

The 3 months correlation between Neinor and Tier1 is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Neinor Homes SLU and Tier1 Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tier1 Technology and Neinor Homes 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 Neinor Homes SLU are associated (or correlated) with Tier1 Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tier1 Technology has no effect on the direction of Neinor Homes i.e., Neinor Homes and Tier1 Technology go up and down completely randomly.

Pair Corralation between Neinor Homes and Tier1 Technology

Assuming the 90 days trading horizon Neinor Homes SLU is expected to generate 7.5 times more return on investment than Tier1 Technology. However, Neinor Homes is 7.5 times more volatile than Tier1 Technology SA. It trades about 0.06 of its potential returns per unit of risk. Tier1 Technology SA is currently generating about 0.11 per unit of risk. If you would invest  1,444  in Neinor Homes SLU on December 2, 2024 and sell it today you would earn a total of  78.00  from holding Neinor Homes SLU or generate 5.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	82.54%
Values	Daily Returns

Neinor Homes SLU  vs.  Tier1 Technology SA

Neinor Homes SLU

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Neinor Homes SLU are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Neinor Homes is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Tier1 Technology

Risk-Adjusted Performance

OK

Over the last 90 days Tier1 Technology SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Tier1 Technology is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Neinor Homes and Tier1 Technology

The main advantage of trading using opposite Neinor Homes and Tier1 Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neinor Homes position performs unexpectedly, Tier1 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 Tier1 Technology will offset losses from the drop in Tier1 Technology's long position.

The idea behind Neinor Homes SLU and Tier1 Technology SA 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.