Correlation Between NTG Nordic and Heidelberg Materials

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

Diversification Opportunities for NTG Nordic and Heidelberg Materials

-0.57

Correlation Coefficient

NTG Nordic  Heidelberg Materials

Excellent diversification

The 3 months correlation between NTG and Heidelberg is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding NTG Nordic Transport and Heidelberg Materials AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberg Materials 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 Heidelberg Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidelberg Materials has no effect on the direction of NTG Nordic i.e., NTG Nordic and Heidelberg Materials go up and down completely randomly.

Pair Corralation between NTG Nordic and Heidelberg Materials

Assuming the 90 days trading horizon NTG Nordic Transport is expected to under-perform the Heidelberg Materials. In addition to that, NTG Nordic is 1.73 times more volatile than Heidelberg Materials AG. It trades about -0.01 of its total potential returns per unit of risk. Heidelberg Materials AG is currently generating about 0.12 per unit of volatility. If you would invest  5,650  in Heidelberg Materials AG on October 5, 2024 and sell it today you would earn a total of  6,315  from holding Heidelberg Materials AG or generate 111.77% return on investment over 90 days.

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

NTG Nordic Transport  vs.  Heidelberg Materials AG

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 fragile 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.

Heidelberg Materials

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Heidelberg Materials AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, Heidelberg Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NTG Nordic and Heidelberg Materials

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

The idea behind NTG Nordic Transport and Heidelberg Materials AG 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.