Correlation Between Nordfyns Bank and North Media

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

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

Diversification Opportunities for Nordfyns Bank and North Media

-0.3

Correlation Coefficient

Nordfyns Bank  North Media

Very good diversification

The 3 months correlation between Nordfyns and North is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Nordfyns Bank AS and North Media AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Media AS and Nordfyns 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 Nordfyns Bank AS are associated (or correlated) with North Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Media AS has no effect on the direction of Nordfyns Bank i.e., Nordfyns Bank and North Media go up and down completely randomly.

Pair Corralation between Nordfyns Bank and North Media

Assuming the 90 days trading horizon Nordfyns Bank AS is expected to generate 0.58 times more return on investment than North Media. However, Nordfyns Bank AS is 1.72 times less risky than North Media. It trades about 0.21 of its potential returns per unit of risk. North Media AS is currently generating about -0.03 per unit of risk. If you would invest  32,000  in Nordfyns Bank AS on December 4, 2024 and sell it today you would earn a total of  4,000  from holding Nordfyns Bank AS or generate 12.5% return on investment over 90 days.

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

Nordfyns Bank AS  vs.  North Media AS

Nordfyns Bank AS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nordfyns Bank AS are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Nordfyns Bank displayed solid returns over the last few months and may actually be approaching a breakup point.

North Media AS

Risk-Adjusted Performance

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 somewhat strong basic indicators, North Media is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nordfyns Bank and North Media

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

The idea behind Nordfyns Bank AS and North Media 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.