Correlation Between NTG Nordic and Phibro Animal

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

Diversification Opportunities for NTG Nordic and Phibro Animal

0.72

Correlation Coefficient

NTG Nordic  Phibro Animal

Poor diversification

The 3 months correlation between NTG and Phibro is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding NTG Nordic Transport and Phibro Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phibro Animal Health 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 Phibro Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phibro Animal Health has no effect on the direction of NTG Nordic i.e., NTG Nordic and Phibro Animal go up and down completely randomly.

Pair Corralation between NTG Nordic and Phibro Animal

Assuming the 90 days trading horizon NTG Nordic Transport is expected to under-perform the Phibro Animal. But the stock apears to be less risky and, when comparing its historical volatility, NTG Nordic Transport is 1.48 times less risky than Phibro Animal. The stock trades about -0.26 of its potential returns per unit of risk. The Phibro Animal Health is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,188  in Phibro Animal Health on October 23, 2024 and sell it today you would lose (168.00) from holding Phibro Animal Health or give up 7.68% of portfolio value over 90 days.

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

NTG Nordic Transport  vs.  Phibro Animal Health

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Phibro Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phibro Animal Health 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.

Pair Trading with NTG Nordic and Phibro Animal

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

The idea behind NTG Nordic Transport and Phibro Animal Health 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.