Correlation Between Fortescue Metals and NN Group
Can any of the company-specific risk be diversified away by investing in both Fortescue Metals 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 Fortescue Metals and NN Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortescue Metals Group and NN Group NV, you can compare the effects of market volatilities on Fortescue Metals 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 Fortescue Metals with a short position of NN Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortescue Metals and NN Group.
Diversification Opportunities for Fortescue Metals and NN Group
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fortescue and 2NN is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group 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 Fortescue Metals 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 Fortescue Metals Group 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 Fortescue Metals i.e., Fortescue Metals and NN Group go up and down completely randomly.
Pair Corralation between Fortescue Metals and NN Group
Assuming the 90 days horizon Fortescue Metals Group is expected to generate 1.55 times more return on investment than NN Group. However, Fortescue Metals is 1.55 times more volatile than NN Group NV. It trades about 0.15 of its potential returns per unit of risk. NN Group NV is currently generating about 0.16 per unit of risk. If you would invest 1,106 in Fortescue Metals Group on October 25, 2024 and sell it today you would earn a total of 45.00 from holding Fortescue Metals Group or generate 4.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortescue Metals Group vs. NN Group NV
Performance |
| Timeline |
| Fortescue Metals |
| NN Group NV |
Fortescue Metals and NN Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortescue Metals and NN Group
The main advantage of trading using opposite Fortescue Metals and NN Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortescue Metals 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.| Fortescue Metals vs. BHP Group Limited | Fortescue Metals vs. BHP Group Limited | Fortescue Metals vs. Rio Tinto Group | Fortescue Metals vs. Vale SA |
| NN Group vs. PLAYMATES TOYS | NN Group vs. GAMESTOP | NN Group vs. DETALION GAMES SA | NN Group vs. Media and Games |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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