Correlation Between Nordic Mining and North Energy

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

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

Diversification Opportunities for Nordic Mining and North Energy

-0.56

Correlation Coefficient

Nordic Mining  North Energy

Excellent diversification

The 3 months correlation between Nordic and North is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Mining ASA and North Energy ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Energy ASA and Nordic Mining 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 Mining ASA are associated (or correlated) with North Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Energy ASA has no effect on the direction of Nordic Mining i.e., Nordic Mining and North Energy go up and down completely randomly.

Pair Corralation between Nordic Mining and North Energy

Assuming the 90 days trading horizon Nordic Mining ASA is expected to generate 2.07 times more return on investment than North Energy. However, Nordic Mining is 2.07 times more volatile than North Energy ASA. It trades about 0.01 of its potential returns per unit of risk. North Energy ASA is currently generating about -0.32 per unit of risk. If you would invest  2,500  in Nordic Mining ASA on October 9, 2024 and sell it today you would lose (1.00) from holding Nordic Mining ASA or give up 0.04% of portfolio value over 90 days.

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

Nordic Mining ASA  vs.  North Energy ASA

Nordic Mining ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordic Mining ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

North Energy ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North Energy ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, North Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nordic Mining and North Energy

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

The idea behind Nordic Mining ASA and North Energy ASA 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.