Correlation Between Nordic Technology and Nordic Aqua

Can any of the company-specific risk be diversified away by investing in both Nordic Technology and Nordic Aqua 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 Nordic Technology and Nordic Aqua into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nordic Technology Group and Nordic Aqua Partners, you can compare the effects of market volatilities on Nordic Technology and Nordic Aqua 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 Nordic Technology with a short position of Nordic Aqua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordic Technology and Nordic Aqua.

Diversification Opportunities for Nordic Technology and Nordic Aqua

-0.19

Correlation Coefficient

Nordic Technology  Nordic Aqua

Good diversification

The 3 months correlation between Nordic and Nordic is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Technology Group and Nordic Aqua Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Aqua Partners and Nordic Technology 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 Nordic Technology Group are associated (or correlated) with Nordic Aqua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Aqua Partners has no effect on the direction of Nordic Technology i.e., Nordic Technology and Nordic Aqua go up and down completely randomly.

Pair Corralation between Nordic Technology and Nordic Aqua

Assuming the 90 days trading horizon Nordic Technology Group is expected to generate 6.38 times more return on investment than Nordic Aqua. However, Nordic Technology is 6.38 times more volatile than Nordic Aqua Partners. It trades about 0.04 of its potential returns per unit of risk. Nordic Aqua Partners is currently generating about 0.11 per unit of risk. If you would invest  190.00  in Nordic Technology Group on December 30, 2024 and sell it today you would lose (21.00) from holding Nordic Technology Group or give up 11.05% of portfolio value over 90 days.

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

Nordic Technology Group  vs.  Nordic Aqua Partners

Nordic Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Technology Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Nordic Technology disclosed solid returns over the last few months and may actually be approaching a breakup point.

Nordic Aqua Partners

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Aqua Partners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Nordic Aqua disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordic Technology and Nordic Aqua

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

The idea behind Nordic Technology Group and Nordic Aqua Partners 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.