Correlation Between NTG Nordic and Traton SE

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

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

Diversification Opportunities for NTG Nordic and Traton SE

0.41

Correlation Coefficient

NTG Nordic  Traton SE

Very weak diversification

The 3 months correlation between NTG and Traton is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding NTG Nordic Transport and Traton SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traton SE and NTG Nordic 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 NTG Nordic Transport are associated (or correlated) with Traton SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traton SE has no effect on the direction of NTG Nordic i.e., NTG Nordic and Traton SE go up and down completely randomly.

Pair Corralation between NTG Nordic and Traton SE

Assuming the 90 days trading horizon NTG Nordic Transport is expected to under-perform the Traton SE. But the stock apears to be less risky and, when comparing its historical volatility, NTG Nordic Transport is 1.45 times less risky than Traton SE. The stock trades about -0.23 of its potential returns per unit of risk. The Traton SE is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,005  in Traton SE on October 11, 2024 and sell it today you would lose (55.00) from holding Traton SE or give up 1.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

NTG Nordic Transport  vs.  Traton SE

NTG Nordic Transport

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NTG Nordic Transport has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Traton SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Traton SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Traton SE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NTG Nordic and Traton SE

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

The idea behind NTG Nordic Transport and Traton SE 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.