Correlation Between NVent Electric and Nexans SA
Can any of the company-specific risk be diversified away by investing in both NVent Electric and Nexans SA 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 NVent Electric and Nexans SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between nVent Electric PLC and Nexans SA, you can compare the effects of market volatilities on NVent Electric and Nexans SA 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 NVent Electric with a short position of Nexans SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVent Electric and Nexans SA.
Diversification Opportunities for NVent Electric and Nexans SA
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NVent and Nexans is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding nVent Electric PLC and Nexans SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexans SA and NVent Electric 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 nVent Electric PLC are associated (or correlated) with Nexans SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexans SA has no effect on the direction of NVent Electric i.e., NVent Electric and Nexans SA go up and down completely randomly.
Pair Corralation between NVent Electric and Nexans SA
Considering the 90-day investment horizon nVent Electric PLC is expected to generate 1.75 times more return on investment than Nexans SA. However, NVent Electric is 1.75 times more volatile than Nexans SA. It trades about -0.04 of its potential returns per unit of risk. Nexans SA is currently generating about -0.32 per unit of risk. If you would invest 6,827 in nVent Electric PLC on November 3, 2024 and sell it today you would lose (318.00) from holding nVent Electric PLC or give up 4.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
nVent Electric PLC vs. Nexans SA
Performance |
| Timeline |
| nVent Electric PLC |
| Nexans SA |
NVent Electric and Nexans SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVent Electric and Nexans SA
The main advantage of trading using opposite NVent Electric and Nexans SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVent Electric position performs unexpectedly, Nexans SA 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 Nexans SA will offset losses from the drop in Nexans SA's long position.| NVent Electric vs. Hubbell | NVent Electric vs. Advanced Energy Industries | NVent Electric vs. Vertiv Holdings Co | NVent Electric vs. Energizer Holdings |
| Nexans SA vs. Novonix | Nexans SA vs. Novonix Ltd ADR | Nexans SA vs. China Carbon Graphit | Nexans SA vs. Flux Power Holdings |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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