Correlation Between Alzinova and Nordic Iron

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

By analyzing existing cross correlation between Alzinova AB and Nordic Iron Ore, you can compare the effects of market volatilities on Alzinova and Nordic Iron 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 Alzinova with a short position of Nordic Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alzinova and Nordic Iron.

Diversification Opportunities for Alzinova and Nordic Iron

0.54

Correlation Coefficient

Alzinova  Nordic Iron

Very weak diversification

The 3 months correlation between Alzinova and Nordic is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Alzinova AB and Nordic Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Iron Ore and Alzinova 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 Alzinova AB are associated (or correlated) with Nordic Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Iron Ore has no effect on the direction of Alzinova i.e., Alzinova and Nordic Iron go up and down completely randomly.

Pair Corralation between Alzinova and Nordic Iron

Assuming the 90 days trading horizon Alzinova AB is expected to under-perform the Nordic Iron. But the stock apears to be less risky and, when comparing its historical volatility, Alzinova AB is 1.51 times less risky than Nordic Iron. The stock trades about -0.04 of its potential returns per unit of risk. The Nordic Iron Ore is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  396.00  in Nordic Iron Ore on September 28, 2024 and sell it today you would earn a total of  60.00  from holding Nordic Iron Ore or generate 15.15% return on investment over 90 days.

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

Alzinova AB  vs.  Nordic Iron Ore

Alzinova AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alzinova AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alzinova is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Nordic Iron Ore

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Iron Ore are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Nordic Iron unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alzinova and Nordic Iron

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

The idea behind Alzinova AB and Nordic Iron Ore 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.