Correlation Between NRC Group and XXL ASA
Can any of the company-specific risk be diversified away by investing in both NRC Group and XXL ASA 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 NRC Group and XXL ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRC Group ASA and XXL ASA, you can compare the effects of market volatilities on NRC Group and XXL ASA 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 NRC Group with a short position of XXL ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRC Group and XXL ASA.
Diversification Opportunities for NRC Group and XXL ASA
Average diversification
The 3 months correlation between NRC and XXL is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding NRC Group ASA and XXL ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XXL ASA and NRC Group 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 NRC Group ASA are associated (or correlated) with XXL ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XXL ASA has no effect on the direction of NRC Group i.e., NRC Group and XXL ASA go up and down completely randomly.
Pair Corralation between NRC Group and XXL ASA
Assuming the 90 days trading horizon NRC Group ASA is expected to generate 0.74 times more return on investment than XXL ASA. However, NRC Group ASA is 1.35 times less risky than XXL ASA. It trades about -0.05 of its potential returns per unit of risk. XXL ASA is currently generating about -0.14 per unit of risk. If you would invest 942.00 in NRC Group ASA on August 29, 2024 and sell it today you would lose (514.00) from holding NRC Group ASA or give up 54.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NRC Group ASA vs. XXL ASA
Performance |
| Timeline |
| NRC Group ASA |
| XXL ASA |
NRC Group and XXL ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NRC Group and XXL ASA
The main advantage of trading using opposite NRC Group and XXL ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRC Group position performs unexpectedly, XXL ASA 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 XXL ASA will offset losses from the drop in XXL ASA's long position.The idea behind NRC Group ASA and XXL ASA 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.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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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