Correlation Between NCAB and CAG Group

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

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

Diversification Opportunities for NCAB and CAG Group

-0.39

Correlation Coefficient

NCAB  CAG Group

Very good diversification

The 3 months correlation between NCAB and CAG is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding NCAB Group and CAG Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAG Group AB and NCAB 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 NCAB Group are associated (or correlated) with CAG Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAG Group AB has no effect on the direction of NCAB i.e., NCAB and CAG Group go up and down completely randomly.

Pair Corralation between NCAB and CAG Group

Assuming the 90 days trading horizon NCAB Group is expected to generate 2.82 times more return on investment than CAG Group. However, NCAB is 2.82 times more volatile than CAG Group AB. It trades about 0.2 of its potential returns per unit of risk. CAG Group AB is currently generating about 0.0 per unit of risk. If you would invest  5,845  in NCAB Group on September 24, 2024 and sell it today you would earn a total of  545.00  from holding NCAB Group or generate 9.32% return on investment over 90 days.

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

NCAB Group  vs.  CAG Group AB

NCAB Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NCAB Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NCAB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

CAG Group AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CAG Group AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, CAG Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NCAB and CAG Group

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

The idea behind NCAB Group and CAG Group 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.