Correlation Between NN Group and Flow Traders

Can any of the company-specific risk be diversified away by investing in both NN Group and Flow Traders 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 Flow Traders 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 Flow Traders BV, you can compare the effects of market volatilities on NN Group and Flow Traders 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 Flow Traders. Check out your portfolio center. Please also check ongoing floating volatility patterns of NN Group and Flow Traders.

Diversification Opportunities for NN Group and Flow Traders

0.9

Correlation Coefficient

NN Group  Flow Traders

Almost no diversification

The 3 months correlation between NN Group and Flow is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding NN Group NV and Flow Traders BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flow Traders BV 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 Flow Traders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flow Traders BV has no effect on the direction of NN Group i.e., NN Group and Flow Traders go up and down completely randomly.

Pair Corralation between NN Group and Flow Traders

Assuming the 90 days horizon NN Group is expected to generate 1.2 times less return on investment than Flow Traders. But when comparing it to its historical volatility, NN Group NV is 1.94 times less risky than Flow Traders. It trades about 0.31 of its potential returns per unit of risk. Flow Traders BV is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,146  in Flow Traders BV on December 30, 2024 and sell it today you would earn a total of  594.00  from holding Flow Traders BV or generate 27.68% return on investment over 90 days.

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

NN Group NV  vs.  Flow Traders BV

NN Group NV

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NN Group NV are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, NN Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Flow Traders BV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Flow Traders BV are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Flow Traders unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NN Group and Flow Traders

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

The idea behind NN Group NV and Flow Traders BV 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.