Correlation Between Nordic Halibut and Nordic Aqua

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

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

Diversification Opportunities for Nordic Halibut and Nordic Aqua

0.5

Correlation Coefficient

Nordic Halibut  Nordic Aqua

Very weak diversification

The 3 months correlation between Nordic and Nordic is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Halibut AS and Nordic Aqua Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Aqua Partners and Nordic Halibut 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 Nordic Halibut AS are associated (or correlated) with Nordic Aqua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Aqua Partners has no effect on the direction of Nordic Halibut i.e., Nordic Halibut and Nordic Aqua go up and down completely randomly.

Pair Corralation between Nordic Halibut and Nordic Aqua

Assuming the 90 days trading horizon Nordic Halibut AS is expected to under-perform the Nordic Aqua. In addition to that, Nordic Halibut is 1.07 times more volatile than Nordic Aqua Partners. It trades about -0.15 of its total potential returns per unit of risk. Nordic Aqua Partners is currently generating about -0.11 per unit of volatility. If you would invest  8,850  in Nordic Aqua Partners on September 4, 2024 and sell it today you would lose (1,450) from holding Nordic Aqua Partners or give up 16.38% of portfolio value over 90 days.

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

Nordic Halibut AS  vs.  Nordic Aqua Partners

Nordic Halibut AS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nordic Aqua Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordic Aqua Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Nordic Halibut and Nordic Aqua

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

The idea behind Nordic Halibut AS and Nordic Aqua Partners 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.