Correlation Between NTG Nordic and Australian Agricultural

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Can any of the company-specific risk be diversified away by investing in both NTG Nordic and Australian Agricultural 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 NTG Nordic and Australian Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NTG Nordic Transport and Australian Agricultural, you can compare the effects of market volatilities on NTG Nordic and Australian Agricultural 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 NTG Nordic with a short position of Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of NTG Nordic and Australian Agricultural.

Diversification Opportunities for NTG Nordic and Australian Agricultural

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between NTG and Australian is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding NTG Nordic Transport and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and NTG Nordic 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 NTG Nordic Transport are associated (or correlated) with Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of NTG Nordic i.e., NTG Nordic and Australian Agricultural go up and down completely randomly.

Pair Corralation between NTG Nordic and Australian Agricultural

Assuming the 90 days trading horizon NTG Nordic Transport is expected to under-perform the Australian Agricultural. In addition to that, NTG Nordic is 1.2 times more volatile than Australian Agricultural. It trades about -0.02 of its total potential returns per unit of risk. Australian Agricultural is currently generating about 0.01 per unit of volatility. If you would invest  82.00  in Australian Agricultural on September 24, 2024 and sell it today you would earn a total of  1.00  from holding Australian Agricultural or generate 1.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

NTG Nordic Transport  vs.  Australian Agricultural

 Performance 
       Timeline  
NTG Nordic Transport 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days NTG Nordic Transport has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Australian Agricultural 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Australian Agricultural has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Australian Agricultural is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

NTG Nordic and Australian Agricultural Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NTG Nordic and Australian Agricultural

The main advantage of trading using opposite NTG Nordic and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NTG Nordic position performs unexpectedly, Australian Agricultural 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 Australian Agricultural will offset losses from the drop in Australian Agricultural's long position.
The idea behind NTG Nordic Transport and Australian Agricultural 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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