Correlation Between ROCKWOOL International and NKT AS

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

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

Diversification Opportunities for ROCKWOOL International and NKT AS

0.31

Correlation Coefficient

ROCKWOOL International  NKT AS

Weak diversification

The 3 months correlation between ROCKWOOL and NKT is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding ROCKWOOL International AS and NKT AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NKT AS and ROCKWOOL International 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 ROCKWOOL International AS are associated (or correlated) with NKT AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NKT AS has no effect on the direction of ROCKWOOL International i.e., ROCKWOOL International and NKT AS go up and down completely randomly.

Pair Corralation between ROCKWOOL International and NKT AS

Assuming the 90 days trading horizon ROCKWOOL International AS is expected to generate 1.25 times more return on investment than NKT AS. However, ROCKWOOL International is 1.25 times more volatile than NKT AS. It trades about -0.16 of its potential returns per unit of risk. NKT AS is currently generating about -0.3 per unit of risk. If you would invest  299,600  in ROCKWOOL International AS on August 31, 2024 and sell it today you would lose (30,800) from holding ROCKWOOL International AS or give up 10.28% of portfolio value over 90 days.

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

ROCKWOOL International AS  vs.  NKT AS

ROCKWOOL International

Risk-Adjusted Performance

0 of 100

Very Weak

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

NKT AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NKT AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with ROCKWOOL International and NKT AS

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

The idea behind ROCKWOOL International AS and NKT 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.