Correlation Between TRON and Northern Data

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

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

Diversification Opportunities for TRON and Northern Data

0.54

Correlation Coefficient

TRON  Northern Data

Very weak diversification

The 3 months correlation between TRON and Northern is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding TRON 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 TRON 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 TRON 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 TRON i.e., TRON and Northern Data go up and down completely randomly.

Pair Corralation between TRON and Northern Data

Assuming the 90 days trading horizon TRON is expected to generate 3.63 times more return on investment than Northern Data. However, TRON is 3.63 times more volatile than Northern Data AG. It trades about 0.09 of its potential returns per unit of risk. Northern Data AG is currently generating about 0.2 per unit of risk. If you would invest  17.00  in TRON on October 25, 2024 and sell it today you would earn a total of  8.00  from holding TRON or generate 47.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.65%
Values	Daily Returns

TRON  vs.  Northern Data AG

TRON

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TRON are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, TRON exhibited solid returns over the last few months and may actually be approaching a breakup point.

Northern Data AG

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Data AG are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Northern Data displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRON and Northern Data

The main advantage of trading using opposite TRON and Northern Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRON 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 TRON 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.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.