Correlation Between North Media and Scandinavian Investment

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

Diversification Opportunities for North Media and Scandinavian Investment

0.13

Correlation Coefficient

North Media  Scandinavian Investment

Average diversification

The 3 months correlation between North and Scandinavian is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding North Media AS and Scandinavian Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Investment 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 Scandinavian Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Investment has no effect on the direction of North Media i.e., North Media and Scandinavian Investment go up and down completely randomly.

Pair Corralation between North Media and Scandinavian Investment

Assuming the 90 days trading horizon North Media AS is expected to under-perform the Scandinavian Investment. But the stock apears to be less risky and, when comparing its historical volatility, North Media AS is 1.1 times less risky than Scandinavian Investment. The stock trades about -0.16 of its potential returns per unit of risk. The Scandinavian Investment Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  328.00  in Scandinavian Investment Group on September 3, 2024 and sell it today you would earn a total of  12.00  from holding Scandinavian Investment Group or generate 3.66% return on investment over 90 days.

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

North Media AS  vs.  Scandinavian Investment Group

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 latest unsteady 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.

Scandinavian Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scandinavian Investment Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Scandinavian Investment is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with North Media and Scandinavian Investment

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

The idea behind North Media AS and Scandinavian Investment Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.