Correlation Between NKT AS and Netcompany Group

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

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

Diversification Opportunities for NKT AS and Netcompany Group

0.74

Correlation Coefficient

NKT AS  Netcompany Group

Poor diversification

The 3 months correlation between NKT and Netcompany is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding NKT AS and Netcompany Group AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcompany Group 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 Netcompany Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcompany Group has no effect on the direction of NKT AS i.e., NKT AS and Netcompany Group go up and down completely randomly.

Pair Corralation between NKT AS and Netcompany Group

Assuming the 90 days trading horizon NKT AS is expected to generate 0.59 times more return on investment than Netcompany Group. However, NKT AS is 1.69 times less risky than Netcompany Group. It trades about -0.1 of its potential returns per unit of risk. Netcompany Group AS is currently generating about -0.11 per unit of risk. If you would invest  53,450  in NKT AS on December 4, 2024 and sell it today you would lose (5,530) from holding NKT AS or give up 10.35% of portfolio value over 90 days.

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

NKT AS  vs.  Netcompany Group AS

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Netcompany Group

Risk-Adjusted Performance

Very Weak

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

Pair Trading with NKT AS and Netcompany Group

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

The idea behind NKT AS and Netcompany Group AS 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.