Correlation Between NIBE Industrier and Trane Technologies

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

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

Diversification Opportunities for NIBE Industrier and Trane Technologies

-0.09

Correlation Coefficient

NIBE Industrier  Trane Technologies

Good diversification

The 3 months correlation between NIBE and Trane is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding NIBE Industrier AB and Trane Technologies plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trane Technologies plc and NIBE Industrier 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 NIBE Industrier AB are associated (or correlated) with Trane Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trane Technologies plc has no effect on the direction of NIBE Industrier i.e., NIBE Industrier and Trane Technologies go up and down completely randomly.

Pair Corralation between NIBE Industrier and Trane Technologies

Assuming the 90 days horizon NIBE Industrier AB is expected to under-perform the Trane Technologies. In addition to that, NIBE Industrier is 2.63 times more volatile than Trane Technologies plc. It trades about -0.14 of its total potential returns per unit of risk. Trane Technologies plc is currently generating about -0.04 per unit of volatility. If you would invest  38,794  in Trane Technologies plc on September 30, 2024 and sell it today you would lose (1,441) from holding Trane Technologies plc or give up 3.71% of portfolio value over 90 days.

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

NIBE Industrier AB  vs.  Trane Technologies plc

NIBE Industrier AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIBE Industrier AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Trane Technologies plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NIBE Industrier and Trane Technologies

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

The idea behind NIBE Industrier AB and Trane Technologies plc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.