Correlation Between Pierce Group and Nordic Waterproofing

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

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

Diversification Opportunities for Pierce Group and Nordic Waterproofing

-0.33

Correlation Coefficient

Pierce Group  Nordic Waterproofing

Very good diversification

The 3 months correlation between Pierce and Nordic is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Pierce Group AB and Nordic Waterproofing Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Waterproofing and Pierce Group 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 Pierce Group AB are associated (or correlated) with Nordic Waterproofing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Waterproofing has no effect on the direction of Pierce Group i.e., Pierce Group and Nordic Waterproofing go up and down completely randomly.

Pair Corralation between Pierce Group and Nordic Waterproofing

Assuming the 90 days trading horizon Pierce Group AB is expected to under-perform the Nordic Waterproofing. In addition to that, Pierce Group is 1.22 times more volatile than Nordic Waterproofing Holding. It trades about -0.05 of its total potential returns per unit of risk. Nordic Waterproofing Holding is currently generating about 0.08 per unit of volatility. If you would invest  16,060  in Nordic Waterproofing Holding on October 26, 2024 and sell it today you would earn a total of  1,700  from holding Nordic Waterproofing Holding or generate 10.59% return on investment over 90 days.

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

Pierce Group AB  vs.  Nordic Waterproofing Holding

Pierce Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pierce Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Nordic Waterproofing

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Waterproofing Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Nordic Waterproofing unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pierce Group and Nordic Waterproofing

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

The idea behind Pierce Group AB and Nordic Waterproofing Holding 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.