Correlation Between NKT AS and Bang Olufsen

Can any of the company-specific risk be diversified away by investing in both NKT AS and Bang Olufsen 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 NKT AS and Bang Olufsen into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for NKT AS and Bang Olufsen

-0.6

Correlation Coefficient

NKT AS  Bang Olufsen

Excellent diversification

The 3 months correlation between NKT and Bang is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding NKT AS and Bang Olufsen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bang Olufsen and NKT AS 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 NKT AS are associated (or correlated) with Bang Olufsen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bang Olufsen has no effect on the direction of NKT AS i.e., NKT AS and Bang Olufsen go up and down completely randomly.

Pair Corralation between NKT AS and Bang Olufsen

Assuming the 90 days trading horizon NKT AS is expected to generate 0.83 times more return on investment than Bang Olufsen. However, NKT AS is 1.2 times less risky than Bang Olufsen. It trades about 0.04 of its potential returns per unit of risk. Bang Olufsen is currently generating about 0.02 per unit of risk. If you would invest  36,176  in NKT AS on September 22, 2024 and sell it today you would earn a total of  14,874  from holding NKT AS or generate 41.12% return on investment over 90 days.

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

NKT AS  vs.  Bang Olufsen

NKT AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NKT AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Bang Olufsen

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bang Olufsen are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Bang Olufsen may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NKT AS and Bang Olufsen

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

The idea behind NKT AS and Bang Olufsen 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 Commodity Directory module to find actively traded commodities issued by global exchanges.