Correlation Between NIBE Industrier and Troax Group

Can any of the company-specific risk be diversified away by investing in both NIBE Industrier and Troax 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 NIBE Industrier and Troax Group 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 Troax Group AB, you can compare the effects of market volatilities on NIBE Industrier and Troax 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 NIBE Industrier with a short position of Troax Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIBE Industrier and Troax Group.

Diversification Opportunities for NIBE Industrier and Troax Group

0.26

Correlation Coefficient

NIBE Industrier  Troax Group

Modest diversification

The 3 months correlation between NIBE and Troax is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NIBE Industrier AB and Troax Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Troax Group AB 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 Troax Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Troax Group AB has no effect on the direction of NIBE Industrier i.e., NIBE Industrier and Troax Group go up and down completely randomly.

Pair Corralation between NIBE Industrier and Troax Group

Assuming the 90 days trading horizon NIBE Industrier AB is expected to under-perform the Troax Group. In addition to that, NIBE Industrier is 1.52 times more volatile than Troax Group AB. It trades about -0.03 of its total potential returns per unit of risk. Troax Group AB is currently generating about -0.04 per unit of volatility. If you would invest  22,150  in Troax Group AB on August 30, 2024 and sell it today you would lose (1,150) from holding Troax Group AB or give up 5.19% of portfolio value over 90 days.

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

NIBE Industrier AB  vs.  Troax Group AB

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. Despite somewhat strong fundamental drivers, NIBE Industrier is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Troax Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NIBE Industrier and Troax Group

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

The idea behind NIBE Industrier AB and Troax 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.