Correlation Between North Media and NKT AS

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

Diversification Opportunities for North Media and NKT AS

0.95

Correlation Coefficient

North Media  NKT AS

Almost no diversification

The 3 months correlation between North and NKT is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding North Media AS and NKT AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NKT 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 NKT AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NKT AS has no effect on the direction of North Media i.e., North Media and NKT AS go up and down completely randomly.

Pair Corralation between North Media and NKT AS

Assuming the 90 days trading horizon North Media AS is expected to under-perform the NKT AS. But the stock apears to be less risky and, when comparing its historical volatility, North Media AS is 1.38 times less risky than NKT AS. The stock trades about -0.07 of its potential returns per unit of risk. The NKT AS is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  52,150  in NKT AS on October 4, 2024 and sell it today you would lose (700.00) from holding NKT AS or give up 1.34% of portfolio value over 90 days.

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

North Media AS  vs.  NKT 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NKT AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NKT AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with North Media and NKT AS

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

The idea behind North Media AS and NKT 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.