Correlation Between North Energy and Nordic Technology
Can any of the company-specific risk be diversified away by investing in both North Energy and Nordic Technology 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 North Energy and Nordic Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North Energy ASA and Nordic Technology Group, you can compare the effects of market volatilities on North Energy and Nordic Technology 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 North Energy with a short position of Nordic Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of North Energy and Nordic Technology.
Diversification Opportunities for North Energy and Nordic Technology
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between North and Nordic is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding North Energy ASA and Nordic Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Technology and North Energy 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 North Energy ASA are associated (or correlated) with Nordic Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Technology has no effect on the direction of North Energy i.e., North Energy and Nordic Technology go up and down completely randomly.
Pair Corralation between North Energy and Nordic Technology
Assuming the 90 days trading horizon North Energy is expected to generate 2.1 times less return on investment than Nordic Technology. But when comparing it to its historical volatility, North Energy ASA is 1.3 times less risky than Nordic Technology. It trades about 0.11 of its potential returns per unit of risk. Nordic Technology Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 250.00 in Nordic Technology Group on August 28, 2024 and sell it today you would earn a total of 20.00 from holding Nordic Technology Group or generate 8.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
North Energy ASA vs. Nordic Technology Group
Performance |
| Timeline |
| North Energy ASA |
| Nordic Technology |
North Energy and Nordic Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North Energy and Nordic Technology
The main advantage of trading using opposite North Energy and Nordic Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North Energy position performs unexpectedly, Nordic Technology 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 Nordic Technology will offset losses from the drop in Nordic Technology's long position.The idea behind North Energy ASA and Nordic Technology Group 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.| Nordic Technology vs. Next Biometrics Group | Nordic Technology vs. Elkem ASA | Nordic Technology vs. Vow ASA | Nordic Technology vs. North Energy ASA |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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