Correlation Between North Media and Carlsberg

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

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

Diversification Opportunities for North Media and Carlsberg

0.87

Correlation Coefficient

North Media  Carlsberg

Very poor diversification

The 3 months correlation between North and Carlsberg is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding North Media AS and Carlsberg AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlsberg AS and North Media 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 Media AS are associated (or correlated) with Carlsberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlsberg AS has no effect on the direction of North Media i.e., North Media and Carlsberg go up and down completely randomly.

Pair Corralation between North Media and Carlsberg

Assuming the 90 days trading horizon North Media AS is expected to generate 1.36 times more return on investment than Carlsberg. However, North Media is 1.36 times more volatile than Carlsberg AS. It trades about -0.01 of its potential returns per unit of risk. Carlsberg AS is currently generating about -0.03 per unit of risk. If you would invest  5,543  in North Media AS on September 22, 2024 and sell it today you would lose (843.00) from holding North Media AS or give up 15.21% of portfolio value over 90 days.

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

North Media AS  vs.  Carlsberg AS

North Media AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North Media AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Carlsberg AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlsberg AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with North Media and Carlsberg

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

The idea behind North Media AS and Carlsberg AS 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.