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 VZ, 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

0.31

Correlation Coefficient

NTG Nordic  VOLKSWAGEN

Weak diversification

The 3 months correlation between NTG and VOLKSWAGEN is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding NTG Nordic Transport and VOLKSWAGEN AG VZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VOLKSWAGEN AG VZ 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 VZ 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 generate 1.55 times more return on investment than VOLKSWAGEN. However, NTG Nordic is 1.55 times more volatile than VOLKSWAGEN AG VZ. It trades about 0.03 of its potential returns per unit of risk. VOLKSWAGEN AG VZ is currently generating about -0.01 per unit of risk. If you would invest  3,095  in NTG Nordic Transport on September 14, 2024 and sell it today you would earn a total of  530.00  from holding NTG Nordic Transport or generate 17.12% return on investment 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 VZ

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 nearly stable basic indicators, NTG Nordic is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

VOLKSWAGEN AG VZ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VOLKSWAGEN AG VZ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VOLKSWAGEN is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the 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 VZ 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.