Correlation Between NN Group and ForFarmers

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

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

Diversification Opportunities for NN Group and ForFarmers

-0.25

Correlation Coefficient

NN Group  ForFarmers

Very good diversification

The 3 months correlation between NN Group and ForFarmers is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding NN Group NV and ForFarmers NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ForFarmers NV and NN Group 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 NN Group NV are associated (or correlated) with ForFarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ForFarmers NV has no effect on the direction of NN Group i.e., NN Group and ForFarmers go up and down completely randomly.

Pair Corralation between NN Group and ForFarmers

Assuming the 90 days horizon NN Group NV is expected to under-perform the ForFarmers. But the stock apears to be less risky and, when comparing its historical volatility, NN Group NV is 1.61 times less risky than ForFarmers. The stock trades about -0.02 of its potential returns per unit of risk. The ForFarmers NV is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  288.00  in ForFarmers NV on October 7, 2024 and sell it today you would earn a total of  61.00  from holding ForFarmers NV or generate 21.18% return on investment over 90 days.

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

NN Group NV  vs.  ForFarmers NV

NN Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

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

ForFarmers NV

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ForFarmers NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ForFarmers may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NN Group and ForFarmers

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

The idea behind NN Group NV and ForFarmers NV 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.