Correlation Between NV Nederlandsche and Holland Colours

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

By analyzing existing cross correlation between NV Nederlandsche Apparatenfabriek and Holland Colours NV, you can compare the effects of market volatilities on NV Nederlandsche and Holland Colours 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 NV Nederlandsche with a short position of Holland Colours. Check out your portfolio center. Please also check ongoing floating volatility patterns of NV Nederlandsche and Holland Colours.

Diversification Opportunities for NV Nederlandsche and Holland Colours

0.63

Correlation Coefficient

NV Nederlandsche  Holland Colours

Poor diversification

The 3 months correlation between NEDAP and Holland is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding NV Nederlandsche Apparatenfabr and Holland Colours NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holland Colours NV and NV Nederlandsche 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 NV Nederlandsche Apparatenfabriek are associated (or correlated) with Holland Colours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holland Colours NV has no effect on the direction of NV Nederlandsche i.e., NV Nederlandsche and Holland Colours go up and down completely randomly.

Pair Corralation between NV Nederlandsche and Holland Colours

Assuming the 90 days trading horizon NV Nederlandsche Apparatenfabriek is expected to under-perform the Holland Colours. But the stock apears to be less risky and, when comparing its historical volatility, NV Nederlandsche Apparatenfabriek is 1.37 times less risky than Holland Colours. The stock trades about -0.08 of its potential returns per unit of risk. The Holland Colours NV is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  9,400  in Holland Colours NV on September 13, 2024 and sell it today you would lose (100.00) from holding Holland Colours NV or give up 1.06% of portfolio value over 90 days.

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

NV Nederlandsche Apparatenfabr  vs.  Holland Colours NV

NV Nederlandsche App

Risk-Adjusted Performance

0 of 100

Very Weak

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

Holland Colours NV

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NV Nederlandsche and Holland Colours

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

The idea behind NV Nederlandsche Apparatenfabriek and Holland Colours NV 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..