Correlation Between AB Traction and NAXS Nordic

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

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

Diversification Opportunities for AB Traction and NAXS Nordic

0.54

Correlation Coefficient

AB Traction  NAXS Nordic

Very weak diversification

The 3 months correlation between TRAC-B and NAXS is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding AB Traction and NAXS Nordic Access in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAXS Nordic Access and AB Traction 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 AB Traction are associated (or correlated) with NAXS Nordic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAXS Nordic Access has no effect on the direction of AB Traction i.e., AB Traction and NAXS Nordic go up and down completely randomly.

Pair Corralation between AB Traction and NAXS Nordic

Assuming the 90 days trading horizon AB Traction is expected to generate 1.09 times more return on investment than NAXS Nordic. However, AB Traction is 1.09 times more volatile than NAXS Nordic Access. It trades about 0.03 of its potential returns per unit of risk. NAXS Nordic Access is currently generating about -0.06 per unit of risk. If you would invest  22,812  in AB Traction on September 26, 2024 and sell it today you would earn a total of  2,788  from holding AB Traction or generate 12.22% return on investment over 90 days.

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

AB Traction  vs.  NAXS Nordic Access

AB Traction

Risk-Adjusted Performance

0 of 100

Very Weak

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

NAXS Nordic Access

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NAXS Nordic Access has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with AB Traction and NAXS Nordic

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

The idea behind AB Traction and NAXS Nordic Access 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.