Correlation Between NTG Nordic and US FOODS

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

Diversification Opportunities for NTG Nordic and US FOODS

-0.47

Correlation Coefficient

NTG Nordic  US FOODS

Very good diversification

The 3 months correlation between NTG and UFH is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding NTG Nordic Transport and US FOODS HOLDING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US FOODS HOLDING 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 US FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US FOODS HOLDING has no effect on the direction of NTG Nordic i.e., NTG Nordic and US FOODS go up and down completely randomly.

Pair Corralation between NTG Nordic and US FOODS

Assuming the 90 days trading horizon NTG Nordic Transport is expected to generate 1.35 times more return on investment than US FOODS. However, NTG Nordic is 1.35 times more volatile than US FOODS HOLDING. It trades about 0.03 of its potential returns per unit of risk. US FOODS HOLDING is currently generating about -0.1 per unit of risk. If you would invest  3,440  in NTG Nordic Transport on December 20, 2024 and sell it today you would earn a total of  65.00  from holding NTG Nordic Transport or generate 1.89% 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.  US FOODS HOLDING

NTG Nordic Transport

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NTG Nordic Transport are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NTG Nordic is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

US FOODS HOLDING

Risk-Adjusted Performance

Very Weak

Over the last 90 days US FOODS HOLDING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with NTG Nordic and US FOODS

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

The idea behind NTG Nordic Transport and US FOODS HOLDING 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.