Correlation Between Trane Technologies and NIBE Industrier

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

By analyzing existing cross correlation between Trane Technologies plc and NIBE Industrier AB, you can compare the effects of market volatilities on Trane Technologies and NIBE Industrier 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 Trane Technologies with a short position of NIBE Industrier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trane Technologies and NIBE Industrier.

Diversification Opportunities for Trane Technologies and NIBE Industrier

-0.42

Correlation Coefficient

Trane Technologies  NIBE Industrier

Very good diversification

The 3 months correlation between Trane and NIBE is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc and NIBE Industrier AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIBE Industrier AB and Trane Technologies 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 Trane Technologies plc are associated (or correlated) with NIBE Industrier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIBE Industrier AB has no effect on the direction of Trane Technologies i.e., Trane Technologies and NIBE Industrier go up and down completely randomly.

Pair Corralation between Trane Technologies and NIBE Industrier

Allowing for the 90-day total investment horizon Trane Technologies plc is expected to under-perform the NIBE Industrier. But the stock apears to be less risky and, when comparing its historical volatility, Trane Technologies plc is 6.57 times less risky than NIBE Industrier. The stock trades about -0.39 of its potential returns per unit of risk. The NIBE Industrier AB is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  429.00  in NIBE Industrier AB on September 25, 2024 and sell it today you would earn a total of  148.00  from holding NIBE Industrier AB or generate 34.5% return on investment over 90 days.

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

Trane Technologies plc  vs.  NIBE Industrier AB

Trane Technologies plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trane Technologies plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Trane Technologies is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

NIBE Industrier AB

Risk-Adjusted Performance

5 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NIBE Industrier AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental drivers, NIBE Industrier reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trane Technologies and NIBE Industrier

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

The idea behind Trane Technologies plc and NIBE Industrier AB 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.