Correlation Between NEL ASA and RTL Group
Can any of the company-specific risk be diversified away by investing in both NEL ASA and RTL 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 NEL ASA and RTL Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEL ASA ADR30 and RTL Group SA, you can compare the effects of market volatilities on NEL ASA and RTL 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 NEL ASA with a short position of RTL Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEL ASA and RTL Group.
Diversification Opportunities for NEL ASA and RTL Group
Poor diversification
The 3 months correlation between NEL and RTL is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding NEL ASA ADR30 and RTL Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL Group SA and NEL ASA 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 NEL ASA ADR30 are associated (or correlated) with RTL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL Group SA has no effect on the direction of NEL ASA i.e., NEL ASA and RTL Group go up and down completely randomly.
Pair Corralation between NEL ASA and RTL Group
Assuming the 90 days trading horizon NEL ASA ADR30 is expected to under-perform the RTL Group. In addition to that, NEL ASA is 4.14 times more volatile than RTL Group SA. It trades about -0.03 of its total potential returns per unit of risk. RTL Group SA is currently generating about -0.05 per unit of volatility. If you would invest 3,007 in RTL Group SA on September 2, 2024 and sell it today you would lose (577.00) from holding RTL Group SA or give up 19.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NEL ASA ADR30 vs. RTL Group SA
Performance |
| Timeline |
| NEL ASA ADR30 |
| RTL Group SA |
NEL ASA and RTL Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NEL ASA and RTL Group
The main advantage of trading using opposite NEL ASA and RTL Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEL ASA position performs unexpectedly, RTL 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 RTL Group will offset losses from the drop in RTL Group's long position.The idea behind NEL ASA ADR30 and RTL Group SA 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.| RTL Group vs. MTI WIRELESS EDGE | RTL Group vs. Infrastrutture Wireless Italiane | RTL Group vs. Marie Brizard Wine | RTL Group vs. GAMING FAC SA |
Check out your portfolio center.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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