Correlation Between Penneo AS and Nexcom AS

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

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

Diversification Opportunities for Penneo AS and Nexcom AS

0.29

Correlation Coefficient

Penneo AS  Nexcom AS

Modest diversification

The 3 months correlation between Penneo and Nexcom is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Penneo AS and Nexcom AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexcom AS and Penneo AS 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 Penneo AS are associated (or correlated) with Nexcom AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexcom AS has no effect on the direction of Penneo AS i.e., Penneo AS and Nexcom AS go up and down completely randomly.

Pair Corralation between Penneo AS and Nexcom AS

Assuming the 90 days trading horizon Penneo AS is expected to generate 2.28 times less return on investment than Nexcom AS. But when comparing it to its historical volatility, Penneo AS is 13.89 times less risky than Nexcom AS. It trades about 0.2 of its potential returns per unit of risk. Nexcom AS is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  438.00  in Nexcom AS on November 30, 2024 and sell it today you would earn a total of  12.00  from holding Nexcom AS or generate 2.74% return on investment over 90 days.

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

Penneo AS  vs.  Nexcom AS

Penneo AS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Penneo AS are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Penneo AS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nexcom AS

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nexcom AS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nexcom AS may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Penneo AS and Nexcom AS

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

The idea behind Penneo AS and Nexcom 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.

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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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.