Correlation Between NTG Nordic and Skjern Bank

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

Diversification Opportunities for NTG Nordic and Skjern Bank

-0.85

Correlation Coefficient

NTG Nordic  Skjern Bank

Pay attention - limited upside

The 3 months correlation between NTG and Skjern is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding NTG Nordic Transport and Skjern Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skjern Bank AS 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 Skjern Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skjern Bank AS has no effect on the direction of NTG Nordic i.e., NTG Nordic and Skjern Bank go up and down completely randomly.

Pair Corralation between NTG Nordic and Skjern Bank

Assuming the 90 days trading horizon NTG Nordic Transport is expected to under-perform the Skjern Bank. In addition to that, NTG Nordic is 1.32 times more volatile than Skjern Bank AS. It trades about -0.05 of its total potential returns per unit of risk. Skjern Bank AS is currently generating about 0.07 per unit of volatility. If you would invest  12,433  in Skjern Bank AS on October 22, 2024 and sell it today you would earn a total of  7,467  from holding Skjern Bank AS or generate 60.06% return on investment over 90 days.

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

NTG Nordic Transport  vs.  Skjern Bank AS

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. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Skjern Bank AS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Skjern Bank AS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Skjern Bank displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NTG Nordic and Skjern Bank

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

The idea behind NTG Nordic Transport and Skjern Bank AS 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.