Correlation Between Sampo Oyj and NN Group

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

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

Diversification Opportunities for Sampo Oyj and NN Group

0.3

Correlation Coefficient

Sampo Oyj  NN Group

Weak diversification

The 3 months correlation between Sampo and NNGPF is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sampo Oyj and NN Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NN Group NV and Sampo Oyj 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 Sampo Oyj are associated (or correlated) with NN Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NN Group NV has no effect on the direction of Sampo Oyj i.e., Sampo Oyj and NN Group go up and down completely randomly.

Pair Corralation between Sampo Oyj and NN Group

Assuming the 90 days horizon Sampo Oyj is expected to generate 0.95 times more return on investment than NN Group. However, Sampo Oyj is 1.06 times less risky than NN Group. It trades about -0.07 of its potential returns per unit of risk. NN Group NV is currently generating about -0.08 per unit of risk. If you would invest  4,523  in Sampo Oyj on August 31, 2024 and sell it today you would lose (221.00) from holding Sampo Oyj or give up 4.89% of portfolio value over 90 days.

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

Sampo Oyj  vs.  NN Group NV

Sampo Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sampo Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sampo Oyj is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NN Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NN Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NN Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sampo Oyj and NN Group

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

The idea behind Sampo Oyj and NN Group NV 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.