Correlation Between NTG Nordic and Volkswagen

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

Diversification Opportunities for NTG Nordic and Volkswagen

0.34

Correlation Coefficient

NTG Nordic  Volkswagen

Weak diversification

The 3 months correlation between NTG and Volkswagen is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding NTG Nordic Transport and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG has no effect on the direction of NTG Nordic i.e., NTG Nordic and Volkswagen go up and down completely randomly.

Pair Corralation between NTG Nordic and Volkswagen

Assuming the 90 days trading horizon NTG Nordic Transport is expected to under-perform the Volkswagen. In addition to that, NTG Nordic is 1.16 times more volatile than Volkswagen AG. It trades about -0.09 of its total potential returns per unit of risk. Volkswagen AG is currently generating about -0.07 per unit of volatility. If you would invest  9,965  in Volkswagen AG on September 25, 2024 and sell it today you would lose (770.00) from holding Volkswagen AG or give up 7.73% of portfolio value over 90 days.

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

NTG Nordic Transport  vs.  Volkswagen 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.

Volkswagen AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG 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 Volkswagen

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

The idea behind NTG Nordic Transport and Volkswagen 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.