Correlation Between Kitron ASA and NRC Group

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

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

Diversification Opportunities for Kitron ASA and NRC Group

0.51

Correlation Coefficient

Kitron ASA  NRC Group

Very weak diversification

The 3 months correlation between Kitron and NRC is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Kitron ASA and NRC Group ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRC Group ASA and Kitron ASA 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 Kitron ASA are associated (or correlated) with NRC Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRC Group ASA has no effect on the direction of Kitron ASA i.e., Kitron ASA and NRC Group go up and down completely randomly.

Pair Corralation between Kitron ASA and NRC Group

Assuming the 90 days trading horizon Kitron ASA is expected to under-perform the NRC Group. But the stock apears to be less risky and, when comparing its historical volatility, Kitron ASA is 3.14 times less risky than NRC Group. The stock trades about -0.01 of its potential returns per unit of risk. The NRC Group ASA is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  310.00  in NRC Group ASA on September 14, 2024 and sell it today you would earn a total of  194.00  from holding NRC Group ASA or generate 62.58% return on investment over 90 days.

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

Kitron ASA  vs.  NRC Group ASA

Kitron ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kitron ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Kitron ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

NRC Group ASA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NRC Group ASA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, NRC Group disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kitron ASA and NRC Group

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

The idea behind Kitron ASA and NRC Group ASA 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 Transaction History module to view history of all your transactions and understand their impact on performance.