Correlation Between NTG Nordic and Laan Spar

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

Diversification Opportunities for NTG Nordic and Laan Spar

0.52

Correlation Coefficient

NTG Nordic  Laan Spar

Very weak diversification

The 3 months correlation between NTG and Laan is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding NTG Nordic Transport and Laan Spar Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laan Spar Bank 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 Laan Spar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laan Spar Bank has no effect on the direction of NTG Nordic i.e., NTG Nordic and Laan Spar go up and down completely randomly.

Pair Corralation between NTG Nordic and Laan Spar

Assuming the 90 days trading horizon NTG Nordic is expected to generate 2.38 times less return on investment than Laan Spar. In addition to that, NTG Nordic is 1.54 times more volatile than Laan Spar Bank. It trades about 0.05 of its total potential returns per unit of risk. Laan Spar Bank is currently generating about 0.2 per unit of volatility. If you would invest  69,000  in Laan Spar Bank on December 28, 2024 and sell it today you would earn a total of  10,500  from holding Laan Spar Bank or generate 15.22% return on investment over 90 days.

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

NTG Nordic Transport  vs.  Laan Spar Bank

NTG Nordic Transport

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NTG Nordic Transport are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, NTG Nordic is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Laan Spar Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Laan Spar Bank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Laan Spar displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NTG Nordic and Laan Spar

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

The idea behind NTG Nordic Transport and Laan Spar Bank 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.