Correlation Between Pexip Holding and Nordic Unmanned

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

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

Diversification Opportunities for Pexip Holding and Nordic Unmanned

-0.07

Correlation Coefficient

Pexip Holding  Nordic Unmanned

Good diversification

The 3 months correlation between Pexip and Nordic is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Pexip Holding ASA and Nordic Unmanned As in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Unmanned As and Pexip Holding 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 Pexip Holding ASA are associated (or correlated) with Nordic Unmanned. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Unmanned As has no effect on the direction of Pexip Holding i.e., Pexip Holding and Nordic Unmanned go up and down completely randomly.

Pair Corralation between Pexip Holding and Nordic Unmanned

Assuming the 90 days trading horizon Pexip Holding ASA is expected to under-perform the Nordic Unmanned. But the stock apears to be less risky and, when comparing its historical volatility, Pexip Holding ASA is 9.06 times less risky than Nordic Unmanned. The stock trades about -0.08 of its potential returns per unit of risk. The Nordic Unmanned As is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  49.00  in Nordic Unmanned As on November 28, 2024 and sell it today you would earn a total of  28.00  from holding Nordic Unmanned As or generate 57.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.96%
Values	Daily Returns

Pexip Holding ASA  vs.  Nordic Unmanned As

Pexip Holding ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pexip Holding ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Pexip Holding is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Nordic Unmanned As

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Unmanned As are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Nordic Unmanned displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pexip Holding and Nordic Unmanned

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

The idea behind Pexip Holding ASA and Nordic Unmanned 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.