Correlation Between NN Group and IA Financial

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

Diversification Opportunities for NN Group and IA Financial

-0.55

Correlation Coefficient

NN Group  IA Financial

Excellent diversification

The 3 months correlation between NNGPF and IAFNF is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding NN Group NV and iA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iA Financial 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 IA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iA Financial has no effect on the direction of NN Group i.e., NN Group and IA Financial go up and down completely randomly.

Pair Corralation between NN Group and IA Financial

Assuming the 90 days horizon NN Group NV is expected to under-perform the IA Financial. But the pink sheet apears to be less risky and, when comparing its historical volatility, NN Group NV is 1.47 times less risky than IA Financial. The pink sheet trades about -0.08 of its potential returns per unit of risk. The iA Financial is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  7,599  in iA Financial on September 2, 2024 and sell it today you would earn a total of  1,731  from holding iA Financial or generate 22.78% return on investment over 90 days.

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

NN Group NV  vs.  iA Financial

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. Despite nearly stable basic indicators, NN Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

iA Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iA Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, IA Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NN Group and IA Financial

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

The idea behind NN Group NV and iA Financial 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.