Correlation Between Norion Bank and Arctic Paper

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

By analyzing existing cross correlation between Norion Bank and Arctic Paper SA, you can compare the effects of market volatilities on Norion Bank and Arctic Paper 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 Norion Bank with a short position of Arctic Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norion Bank and Arctic Paper.

Diversification Opportunities for Norion Bank and Arctic Paper

0.43

Correlation Coefficient

Norion Bank  Arctic Paper

Very weak diversification

The 3 months correlation between Norion and Arctic is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Norion Bank and Arctic Paper SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arctic Paper SA and Norion Bank 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 Norion Bank are associated (or correlated) with Arctic Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arctic Paper SA has no effect on the direction of Norion Bank i.e., Norion Bank and Arctic Paper go up and down completely randomly.

Pair Corralation between Norion Bank and Arctic Paper

Assuming the 90 days trading horizon Norion Bank is expected to generate 1.05 times more return on investment than Arctic Paper. However, Norion Bank is 1.05 times more volatile than Arctic Paper SA. It trades about -0.02 of its potential returns per unit of risk. Arctic Paper SA is currently generating about -0.18 per unit of risk. If you would invest  4,175  in Norion Bank on August 31, 2024 and sell it today you would lose (160.00) from holding Norion Bank or give up 3.83% of portfolio value over 90 days.

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

Norion Bank  vs.  Arctic Paper SA

Norion Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norion Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Norion Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Arctic Paper SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arctic Paper SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Norion Bank and Arctic Paper

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

The idea behind Norion Bank and Arctic Paper SA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.