Correlation Between Investor and Nordisk Bergteknik

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

By analyzing existing cross correlation between Investor AB ser and Nordisk Bergteknik AB, you can compare the effects of market volatilities on Investor and Nordisk Bergteknik 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 Investor with a short position of Nordisk Bergteknik. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investor and Nordisk Bergteknik.

Diversification Opportunities for Investor and Nordisk Bergteknik

0.38

Correlation Coefficient

Investor  Nordisk Bergteknik

Weak diversification

The 3 months correlation between Investor and Nordisk is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB ser and Nordisk Bergteknik AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordisk Bergteknik and Investor 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 Investor AB ser are associated (or correlated) with Nordisk Bergteknik. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordisk Bergteknik has no effect on the direction of Investor i.e., Investor and Nordisk Bergteknik go up and down completely randomly.

Pair Corralation between Investor and Nordisk Bergteknik

Assuming the 90 days trading horizon Investor AB ser is expected to generate 0.54 times more return on investment than Nordisk Bergteknik. However, Investor AB ser is 1.85 times less risky than Nordisk Bergteknik. It trades about -0.03 of its potential returns per unit of risk. Nordisk Bergteknik AB is currently generating about -0.31 per unit of risk. If you would invest  30,599  in Investor AB ser on September 2, 2024 and sell it today you would lose (674.00) from holding Investor AB ser or give up 2.2% of portfolio value over 90 days.

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

Investor AB ser  vs.  Nordisk Bergteknik AB

Investor AB ser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investor AB ser has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Investor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nordisk Bergteknik

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordisk Bergteknik AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Investor and Nordisk Bergteknik

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

The idea behind Investor AB ser and Nordisk Bergteknik 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.