Correlation Between Retail Estates and Northern Data

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

By analyzing existing cross correlation between Retail Estates NV and Northern Data AG, you can compare the effects of market volatilities on Retail Estates and Northern Data 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 Retail Estates with a short position of Northern Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retail Estates and Northern Data.

Diversification Opportunities for Retail Estates and Northern Data

-0.76

Correlation Coefficient

Retail Estates  Northern Data

Pay attention - limited upside

The 3 months correlation between Retail and Northern is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates NV and Northern Data AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Data AG and Retail Estates 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 Retail Estates NV are associated (or correlated) with Northern Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Data AG has no effect on the direction of Retail Estates i.e., Retail Estates and Northern Data go up and down completely randomly.

Pair Corralation between Retail Estates and Northern Data

Assuming the 90 days horizon Retail Estates is expected to generate 11.22 times less return on investment than Northern Data. But when comparing it to its historical volatility, Retail Estates NV is 4.06 times less risky than Northern Data. It trades about 0.03 of its potential returns per unit of risk. Northern Data AG is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,140  in Northern Data AG on October 11, 2024 and sell it today you would earn a total of  3,810  from holding Northern Data AG or generate 334.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Retail Estates NV  vs.  Northern Data AG

Retail Estates NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retail Estates NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Northern Data AG

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Data AG are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Northern Data displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Retail Estates and Northern Data

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

The idea behind Retail Estates NV and Northern Data AG 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.