Correlation Between Nel ASA and SMC Corp
Can any of the company-specific risk be diversified away by investing in both Nel ASA and SMC Corp 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 SMC Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nel ASA and SMC Corp Japan, you can compare the effects of market volatilities on Nel ASA and SMC Corp 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 SMC Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nel ASA and SMC Corp.
Diversification Opportunities for Nel ASA and SMC Corp
Poor diversification
The 3 months correlation between Nel and SMC is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nel ASA and SMC Corp Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Corp Japan 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 SMC Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMC Corp Japan has no effect on the direction of Nel ASA i.e., Nel ASA and SMC Corp go up and down completely randomly.
Pair Corralation between Nel ASA and SMC Corp
Assuming the 90 days horizon Nel ASA is expected to under-perform the SMC Corp. In addition to that, Nel ASA is 6.85 times more volatile than SMC Corp Japan. It trades about -0.15 of its total potential returns per unit of risk. SMC Corp Japan is currently generating about -0.26 per unit of volatility. If you would invest 1,964 in SMC Corp Japan on October 20, 2024 and sell it today you would lose (103.00) from holding SMC Corp Japan or give up 5.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nel ASA vs. SMC Corp Japan
Performance |
| Timeline |
| Nel ASA |
| SMC Corp Japan |
Nel ASA and SMC Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nel ASA and SMC Corp
The main advantage of trading using opposite Nel ASA and SMC Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nel ASA position performs unexpectedly, SMC Corp 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 SMC Corp will offset losses from the drop in SMC Corp's long position.The idea behind Nel ASA and SMC Corp Japan 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.| SMC Corp vs. Schneider Electric SE | SMC Corp vs. Atlas Copco AB | SMC Corp vs. Fanuc | SMC Corp vs. Sandvik AB |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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