Correlation Between NKT AS and Dantax

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

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

Diversification Opportunities for NKT AS and Dantax

-0.04

Correlation Coefficient

NKT AS  Dantax

Good diversification

The 3 months correlation between NKT and Dantax is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding NKT AS and Dantax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dantax 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 Dantax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dantax has no effect on the direction of NKT AS i.e., NKT AS and Dantax go up and down completely randomly.

Pair Corralation between NKT AS and Dantax

Assuming the 90 days trading horizon NKT AS is expected to under-perform the Dantax. But the stock apears to be less risky and, when comparing its historical volatility, NKT AS is 1.02 times less risky than Dantax. The stock trades about -0.02 of its potential returns per unit of risk. The Dantax is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  43,000  in Dantax on December 28, 2024 and sell it today you would earn a total of  5,800  from holding Dantax or generate 13.49% return on investment over 90 days.

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

NKT AS  vs.  Dantax

NKT AS

Risk-Adjusted Performance

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 very healthy basic indicators, NKT AS is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Dantax

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dantax are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dantax displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NKT AS and Dantax

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

The idea behind NKT AS and Dantax 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.