Correlation Between Investment and NAXS Nordic

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

By analyzing existing cross correlation between Investment AB Oresund and NAXS Nordic Access, you can compare the effects of market volatilities on Investment and NAXS Nordic 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 Investment with a short position of NAXS Nordic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment and NAXS Nordic.

Diversification Opportunities for Investment and NAXS Nordic

0.8

Correlation Coefficient

Investment  NAXS Nordic

Very poor diversification

The 3 months correlation between Investment and NAXS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Investment AB Oresund and NAXS Nordic Access in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAXS Nordic Access and Investment 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 Investment AB Oresund are associated (or correlated) with NAXS Nordic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAXS Nordic Access has no effect on the direction of Investment i.e., Investment and NAXS Nordic go up and down completely randomly.

Pair Corralation between Investment and NAXS Nordic

Assuming the 90 days trading horizon Investment AB Oresund is expected to under-perform the NAXS Nordic. In addition to that, Investment is 1.44 times more volatile than NAXS Nordic Access. It trades about -0.16 of its total potential returns per unit of risk. NAXS Nordic Access is currently generating about -0.23 per unit of volatility. If you would invest  5,840  in NAXS Nordic Access on September 26, 2024 and sell it today you would lose (760.00) from holding NAXS Nordic Access or give up 13.01% of portfolio value over 90 days.

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

Investment AB Oresund  vs.  NAXS Nordic Access

Investment AB Oresund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investment AB Oresund 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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

NAXS Nordic Access

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NAXS Nordic Access 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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Investment and NAXS Nordic

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

The idea behind Investment AB Oresund and NAXS Nordic Access 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.