Correlation Between Japan Medical and NTG Nordic

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

By analyzing existing cross correlation between Japan Medical Dynamic and NTG Nordic Transport, you can compare the effects of market volatilities on Japan Medical and NTG Nordic 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 Japan Medical with a short position of NTG Nordic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Medical and NTG Nordic.

Diversification Opportunities for Japan Medical and NTG Nordic

-0.02

Correlation Coefficient

Japan Medical  NTG Nordic

Good diversification

The 3 months correlation between Japan and NTG is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Japan Medical Dynamic and NTG Nordic Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NTG Nordic Transport and Japan Medical 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 Japan Medical Dynamic are associated (or correlated) with NTG Nordic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NTG Nordic Transport has no effect on the direction of Japan Medical i.e., Japan Medical and NTG Nordic go up and down completely randomly.

Pair Corralation between Japan Medical and NTG Nordic

Assuming the 90 days horizon Japan Medical Dynamic is expected to under-perform the NTG Nordic. But the stock apears to be less risky and, when comparing its historical volatility, Japan Medical Dynamic is 1.42 times less risky than NTG Nordic. The stock trades about -0.06 of its potential returns per unit of risk. The NTG Nordic Transport is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,225  in NTG Nordic Transport on November 20, 2024 and sell it today you would lose (1,045) from holding NTG Nordic Transport or give up 24.73% of portfolio value over 90 days.

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

Japan Medical Dynamic  vs.  NTG Nordic Transport

Japan Medical Dynamic

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Medical Dynamic are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Japan Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NTG Nordic Transport

Risk-Adjusted Performance

Very Weak

Over the last 90 days NTG Nordic Transport has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Japan Medical and NTG Nordic

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

The idea behind Japan Medical Dynamic and NTG Nordic Transport 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..