Correlation Between NTG Nordic and Strategic Investments

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

Diversification Opportunities for NTG Nordic and Strategic Investments

0.68

Correlation Coefficient

NTG Nordic  Strategic Investments

Poor diversification

The 3 months correlation between NTG and Strategic is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding NTG Nordic Transport and Strategic Investments AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Investments 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 Strategic Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Investments has no effect on the direction of NTG Nordic i.e., NTG Nordic and Strategic Investments go up and down completely randomly.

Pair Corralation between NTG Nordic and Strategic Investments

Assuming the 90 days trading horizon NTG Nordic Transport is expected to under-perform the Strategic Investments. But the stock apears to be less risky and, when comparing its historical volatility, NTG Nordic Transport is 1.79 times less risky than Strategic Investments. The stock trades about -0.12 of its potential returns per unit of risk. The Strategic Investments AS is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  111.00  in Strategic Investments AS on September 22, 2024 and sell it today you would lose (6.00) from holding Strategic Investments AS or give up 5.41% of portfolio value over 90 days.

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

NTG Nordic Transport  vs.  Strategic Investments 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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Strategic Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategic Investments AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Strategic Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NTG Nordic and Strategic Investments

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

The idea behind NTG Nordic Transport and Strategic Investments 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.

Check out your portfolio center.

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.