Correlation Between Nordic Mining and Norske Skog

Can any of the company-specific risk be diversified away by investing in both Nordic Mining and Norske Skog 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 Norske Skog 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 Norske Skog Asa, you can compare the effects of market volatilities on Nordic Mining and Norske Skog 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 Norske Skog. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordic Mining and Norske Skog.

Diversification Opportunities for Nordic Mining and Norske Skog

0.52

Correlation Coefficient

Nordic Mining  Norske Skog

Very weak diversification

The 3 months correlation between Nordic and Norske is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Mining ASA and Norske Skog Asa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norske Skog 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 Norske Skog. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norske Skog Asa has no effect on the direction of Nordic Mining i.e., Nordic Mining and Norske Skog go up and down completely randomly.

Pair Corralation between Nordic Mining and Norske Skog

Assuming the 90 days trading horizon Nordic Mining ASA is expected to under-perform the Norske Skog. But the stock apears to be less risky and, when comparing its historical volatility, Nordic Mining ASA is 2.3 times less risky than Norske Skog. The stock trades about -0.09 of its potential returns per unit of risk. The Norske Skog Asa is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,120  in Norske Skog Asa on November 28, 2024 and sell it today you would earn a total of  318.00  from holding Norske Skog Asa or generate 15.0% return on investment over 90 days.

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

Nordic Mining ASA  vs.  Norske Skog Asa

Nordic Mining ASA

Risk-Adjusted Performance

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.

Norske Skog Asa

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Norske Skog Asa are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Norske Skog displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordic Mining and Norske Skog

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

The idea behind Nordic Mining ASA and Norske Skog 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.