Correlation Between AF Gruppen and NRC Group

Can any of the company-specific risk be diversified away by investing in both AF Gruppen and NRC Group 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 AF Gruppen and NRC Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AF Gruppen ASA and NRC Group ASA, you can compare the effects of market volatilities on AF Gruppen and NRC Group 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 AF Gruppen with a short position of NRC Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of AF Gruppen and NRC Group.

Diversification Opportunities for AF Gruppen and NRC Group

0.82

Correlation Coefficient

AF Gruppen  NRC Group

Very poor diversification

The 3 months correlation between AFG and NRC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding AF Gruppen ASA and NRC Group ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRC Group ASA and AF Gruppen 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 AF Gruppen ASA are associated (or correlated) with NRC Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRC Group ASA has no effect on the direction of AF Gruppen i.e., AF Gruppen and NRC Group go up and down completely randomly.

Pair Corralation between AF Gruppen and NRC Group

Assuming the 90 days trading horizon AF Gruppen is expected to generate 1.9 times less return on investment than NRC Group. But when comparing it to its historical volatility, AF Gruppen ASA is 3.46 times less risky than NRC Group. It trades about 0.24 of its potential returns per unit of risk. NRC Group ASA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  374.00  in NRC Group ASA on September 25, 2024 and sell it today you would earn a total of  122.00  from holding NRC Group ASA or generate 32.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

AF Gruppen ASA  vs.  NRC Group ASA

AF Gruppen ASA

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AF Gruppen ASA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, AF Gruppen disclosed solid returns over the last few months and may actually be approaching a breakup point.

NRC Group ASA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NRC Group ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, NRC Group disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AF Gruppen and NRC Group

The main advantage of trading using opposite AF Gruppen and NRC Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AF Gruppen position performs unexpectedly, NRC Group 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 NRC Group will offset losses from the drop in NRC Group's long position.

The idea behind AF Gruppen ASA and NRC Group 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.