Correlation Between NCC AB and Bravida Holding

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

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

Diversification Opportunities for NCC AB and Bravida Holding

0.96

Correlation Coefficient

NCC AB  Bravida Holding

Almost no diversification

The 3 months correlation between NCC and Bravida is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding NCC AB and Bravida Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bravida Holding AB and NCC AB 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 NCC AB are associated (or correlated) with Bravida Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bravida Holding AB has no effect on the direction of NCC AB i.e., NCC AB and Bravida Holding go up and down completely randomly.

Pair Corralation between NCC AB and Bravida Holding

Assuming the 90 days trading horizon NCC AB is expected to generate 1.6 times more return on investment than Bravida Holding. However, NCC AB is 1.6 times more volatile than Bravida Holding AB. It trades about 0.15 of its potential returns per unit of risk. Bravida Holding AB is currently generating about 0.19 per unit of risk. If you would invest  16,200  in NCC AB on December 30, 2024 and sell it today you would earn a total of  3,050  from holding NCC AB or generate 18.83% return on investment over 90 days.

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

NCC AB  vs.  Bravida Holding AB

NCC AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NCC AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NCC AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bravida Holding AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bravida Holding AB are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Bravida Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NCC AB and Bravida Holding

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

The idea behind NCC AB and Bravida Holding 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.