Correlation Between North Energy and Nordic Mining

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

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

Diversification Opportunities for North Energy and Nordic Mining

-0.05

Correlation Coefficient

North Energy  Nordic Mining

Good diversification

The 3 months correlation between North and Nordic is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding North Energy ASA and Nordic Mining ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Mining ASA and North Energy 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 North Energy ASA are associated (or correlated) with Nordic Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Mining ASA has no effect on the direction of North Energy i.e., North Energy and Nordic Mining go up and down completely randomly.

Pair Corralation between North Energy and Nordic Mining

Assuming the 90 days trading horizon North Energy ASA is expected to generate 0.68 times more return on investment than Nordic Mining. However, North Energy ASA is 1.47 times less risky than Nordic Mining. It trades about 0.04 of its potential returns per unit of risk. Nordic Mining ASA is currently generating about 0.0 per unit of risk. If you would invest  194.00  in North Energy ASA on November 20, 2024 and sell it today you would earn a total of  88.00  from holding North Energy ASA or generate 45.36% return on investment over 90 days.

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

North Energy ASA  vs.  Nordic Mining ASA

North Energy ASA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in North Energy ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, North Energy is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with North Energy and Nordic Mining

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

The idea behind North Energy ASA and Nordic Mining 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.