Correlation Between NKT AS and RTX AS
Can any of the company-specific risk be diversified away by investing in both NKT AS and RTX 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 NKT AS and RTX AS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NKT AS and RTX AS, you can compare the effects of market volatilities on NKT AS and RTX 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 NKT AS with a short position of RTX AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of NKT AS and RTX AS.
Diversification Opportunities for NKT AS and RTX AS
Very poor diversification
The 3 months correlation between NKT and RTX is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding NKT AS and RTX AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTX AS and NKT 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 NKT AS are associated (or correlated) with RTX AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTX AS has no effect on the direction of NKT AS i.e., NKT AS and RTX AS go up and down completely randomly.
Pair Corralation between NKT AS and RTX AS
Assuming the 90 days trading horizon NKT AS is expected to under-perform the RTX AS. But the stock apears to be less risky and, when comparing its historical volatility, NKT AS is 2.03 times less risky than RTX AS. The stock trades about -0.04 of its potential returns per unit of risk. The RTX AS is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 5,680 in RTX AS on October 26, 2024 and sell it today you would earn a total of 820.00 from holding RTX AS or generate 14.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NKT AS vs. RTX AS
Performance |
| Timeline |
| NKT AS |
| RTX AS |
NKT AS and RTX AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NKT AS and RTX AS
The main advantage of trading using opposite NKT AS and RTX AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NKT AS position performs unexpectedly, RTX 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 RTX AS will offset losses from the drop in RTX AS's long position.| 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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