Correlation Between Next Biometrics and Storebrand ASA

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

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

Diversification Opportunities for Next Biometrics and Storebrand ASA

0.12

Correlation Coefficient

Next Biometrics  Storebrand ASA

Average diversification

The 3 months correlation between Next and Storebrand is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Next Biometrics Group and Storebrand ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Storebrand ASA and Next Biometrics 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 Next Biometrics Group are associated (or correlated) with Storebrand ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Storebrand ASA has no effect on the direction of Next Biometrics i.e., Next Biometrics and Storebrand ASA go up and down completely randomly.

Pair Corralation between Next Biometrics and Storebrand ASA

Assuming the 90 days trading horizon Next Biometrics Group is expected to under-perform the Storebrand ASA. In addition to that, Next Biometrics is 1.42 times more volatile than Storebrand ASA. It trades about -0.06 of its total potential returns per unit of risk. Storebrand ASA is currently generating about 0.01 per unit of volatility. If you would invest  12,260  in Storebrand ASA on December 2, 2024 and sell it today you would lose (10.00) from holding Storebrand ASA or give up 0.08% of portfolio value over 90 days.

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

Next Biometrics Group  vs.  Storebrand ASA

Next Biometrics Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Next Biometrics Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Storebrand ASA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Next Biometrics and Storebrand ASA

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

The idea behind Next Biometrics Group and Storebrand 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.