Correlation Between Nordic Asia and High Coast

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

By analyzing existing cross correlation between Nordic Asia Investment and High Coast Distillery, you can compare the effects of market volatilities on Nordic Asia and High Coast 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 Nordic Asia with a short position of High Coast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordic Asia and High Coast.

Diversification Opportunities for Nordic Asia and High Coast

0.36

Correlation Coefficient

Nordic Asia  High Coast

Weak diversification

The 3 months correlation between Nordic and High is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Asia Investment and High Coast Distillery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Coast Distillery and Nordic Asia 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 Nordic Asia Investment are associated (or correlated) with High Coast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Coast Distillery has no effect on the direction of Nordic Asia i.e., Nordic Asia and High Coast go up and down completely randomly.

Pair Corralation between Nordic Asia and High Coast

Assuming the 90 days trading horizon Nordic Asia Investment is expected to generate 0.44 times more return on investment than High Coast. However, Nordic Asia Investment is 2.27 times less risky than High Coast. It trades about -0.29 of its potential returns per unit of risk. High Coast Distillery is currently generating about -0.18 per unit of risk. If you would invest  290.00  in Nordic Asia Investment on October 25, 2024 and sell it today you would lose (26.00) from holding Nordic Asia Investment or give up 8.97% of portfolio value over 90 days.

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

Nordic Asia Investment  vs.  High Coast Distillery

Nordic Asia Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

High Coast Distillery

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nordic Asia and High Coast

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

The idea behind Nordic Asia Investment and High Coast Distillery 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.