Correlation Between Nordic Unmanned and Nel ASA

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

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

Diversification Opportunities for Nordic Unmanned and Nel ASA

0.81

Correlation Coefficient

Nordic Unmanned  Nel ASA

Very poor diversification

The 3 months correlation between Nordic and Nel is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Unmanned As and Nel ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nel ASA and Nordic Unmanned 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 Unmanned As are associated (or correlated) with Nel ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nel ASA has no effect on the direction of Nordic Unmanned i.e., Nordic Unmanned and Nel ASA go up and down completely randomly.

Pair Corralation between Nordic Unmanned and Nel ASA

Assuming the 90 days trading horizon Nordic Unmanned As is expected to under-perform the Nel ASA. In addition to that, Nordic Unmanned is 4.01 times more volatile than Nel ASA. It trades about -0.16 of its total potential returns per unit of risk. Nel ASA is currently generating about -0.22 per unit of volatility. If you would invest  566.00  in Nel ASA on September 2, 2024 and sell it today you would lose (263.00) from holding Nel ASA or give up 46.47% of portfolio value over 90 days.

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

Nordic Unmanned As  vs.  Nel ASA

Nordic Unmanned As

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordic Unmanned As has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic 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.

Nel ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nel ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Nordic Unmanned and Nel ASA

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

The idea behind Nordic Unmanned As and Nel ASA 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.