Correlation Between ISS AS and NKT AS
Can any of the company-specific risk be diversified away by investing in both ISS AS and NKT AS 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 ISS AS and NKT AS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ISS AS and NKT AS, you can compare the effects of market volatilities on ISS AS and NKT AS 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 ISS AS with a short position of NKT AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of ISS AS and NKT AS.
Diversification Opportunities for ISS AS and NKT AS
Very weak diversification
The 3 months correlation between ISS and NKT is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding ISS AS and NKT AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NKT AS and ISS AS 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 ISS AS are associated (or correlated) with NKT AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NKT AS has no effect on the direction of ISS AS i.e., ISS AS and NKT AS go up and down completely randomly.
Pair Corralation between ISS AS and NKT AS
Assuming the 90 days trading horizon ISS AS is expected to generate 0.56 times more return on investment than NKT AS. However, ISS AS is 1.78 times less risky than NKT AS. It trades about -0.09 of its potential returns per unit of risk. NKT AS is currently generating about -0.3 per unit of risk. If you would invest 13,170 in ISS AS on September 1, 2024 and sell it today you would lose (370.00) from holding ISS AS or give up 2.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ISS AS vs. NKT AS
Performance |
| Timeline |
| ISS AS |
| NKT AS |
ISS AS and NKT AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ISS AS and NKT AS
The main advantage of trading using opposite ISS AS and NKT AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ISS AS position performs unexpectedly, NKT AS 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 NKT AS will offset losses from the drop in NKT AS's long position.The idea behind ISS AS and NKT AS 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.| NKT AS vs. FLSmidth Co | NKT AS vs. GN Store Nord | NKT AS vs. DSV Panalpina AS | NKT AS vs. ROCKWOOL International AS |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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