Correlation Between Nel ASA and ITM Power
Can any of the company-specific risk be diversified away by investing in both Nel ASA and ITM Power 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 ITM Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nel ASA and ITM Power Plc, you can compare the effects of market volatilities on Nel ASA and ITM Power 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 ITM Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nel ASA and ITM Power.
Diversification Opportunities for Nel ASA and ITM Power
Almost no diversification
The 3 months correlation between Nel and ITM is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Nel ASA and ITM Power Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITM Power Plc 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 are associated (or correlated) with ITM Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITM Power Plc has no effect on the direction of Nel ASA i.e., Nel ASA and ITM Power go up and down completely randomly.
Pair Corralation between Nel ASA and ITM Power
Assuming the 90 days horizon Nel ASA is expected to under-perform the ITM Power. In addition to that, Nel ASA is 1.01 times more volatile than ITM Power Plc. It trades about -0.05 of its total potential returns per unit of risk. ITM Power Plc is currently generating about -0.02 per unit of volatility. If you would invest 122.00 in ITM Power Plc on September 3, 2024 and sell it today you would lose (79.00) from holding ITM Power Plc or give up 64.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nel ASA vs. ITM Power Plc
Performance |
| Timeline |
| Nel ASA |
| ITM Power Plc |
Nel ASA and ITM Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nel ASA and ITM Power
The main advantage of trading using opposite Nel ASA and ITM Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nel ASA position performs unexpectedly, ITM Power 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 ITM Power will offset losses from the drop in ITM Power's long position.| Nel ASA vs. Dear Cashmere Holding | Nel ASA vs. Goff Corp | Nel ASA vs. Wialan Technologies | Nel ASA vs. Cgrowth Capital |
| ITM Power vs. Dear Cashmere Holding | ITM Power vs. Goff Corp | ITM Power vs. Wialan Technologies | ITM Power vs. Cgrowth Capital |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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