Correlation Between Nexans SA and FREYR Battery

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

By analyzing existing cross correlation between Nexans SA and FREYR Battery SA, you can compare the effects of market volatilities on Nexans SA and FREYR Battery 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 Nexans SA with a short position of FREYR Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexans SA and FREYR Battery.

Diversification Opportunities for Nexans SA and FREYR Battery

-0.82

Correlation Coefficient

Nexans SA  FREYR Battery

Pay attention - limited upside

The 3 months correlation between Nexans and FREYR is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Nexans SA and FREYR Battery SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FREYR Battery SA and Nexans SA 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 Nexans SA are associated (or correlated) with FREYR Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FREYR Battery SA has no effect on the direction of Nexans SA i.e., Nexans SA and FREYR Battery go up and down completely randomly.

Pair Corralation between Nexans SA and FREYR Battery

Assuming the 90 days horizon Nexans SA is expected to under-perform the FREYR Battery. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nexans SA is 5.47 times less risky than FREYR Battery. The pink sheet trades about -0.17 of its potential returns per unit of risk. The FREYR Battery SA is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  103.00  in FREYR Battery SA on October 7, 2024 and sell it today you would earn a total of  186.00  from holding FREYR Battery SA or generate 180.58% return on investment over 90 days.

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

Nexans SA  vs.  FREYR Battery SA

Nexans SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nexans SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

FREYR Battery SA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FREYR Battery SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, FREYR Battery showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nexans SA and FREYR Battery

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

The idea behind Nexans SA and FREYR Battery SA 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.