Correlation Between ChemoMetec and PF BankNordik

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

By analyzing existing cross correlation between ChemoMetec AS and PF BankNordik, you can compare the effects of market volatilities on ChemoMetec and PF BankNordik 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 ChemoMetec with a short position of PF BankNordik. Check out your portfolio center. Please also check ongoing floating volatility patterns of ChemoMetec and PF BankNordik.

Diversification Opportunities for ChemoMetec and PF BankNordik

0.63

Correlation Coefficient

ChemoMetec  PF BankNordik

Poor diversification

The 3 months correlation between ChemoMetec and BNORDIK-CSE is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding ChemoMetec AS and PF BankNordik in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PF BankNordik and ChemoMetec 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 ChemoMetec AS are associated (or correlated) with PF BankNordik. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PF BankNordik has no effect on the direction of ChemoMetec i.e., ChemoMetec and PF BankNordik go up and down completely randomly.

Pair Corralation between ChemoMetec and PF BankNordik

Assuming the 90 days trading horizon ChemoMetec AS is expected to generate 7.08 times more return on investment than PF BankNordik. However, ChemoMetec is 7.08 times more volatile than PF BankNordik. It trades about 0.11 of its potential returns per unit of risk. PF BankNordik is currently generating about 0.18 per unit of risk. If you would invest  36,300  in ChemoMetec AS on September 3, 2024 and sell it today you would earn a total of  11,060  from holding ChemoMetec AS or generate 30.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	83.08%
Values	Daily Returns

ChemoMetec AS  vs.  PF BankNordik

ChemoMetec AS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ChemoMetec AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, ChemoMetec exhibited solid returns over the last few months and may actually be approaching a breakup point.

PF BankNordik

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days PF BankNordik has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite unfluctuating basic indicators, PF BankNordik may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ChemoMetec and PF BankNordik

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

The idea behind ChemoMetec AS and PF BankNordik 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.