Correlation Between Goodtech and NRC Group

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

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

Diversification Opportunities for Goodtech and NRC Group

-0.31

Correlation Coefficient

Goodtech  NRC Group

Very good diversification

The 3 months correlation between Goodtech and NRC is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Goodtech 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 Goodtech 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 Goodtech 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 Goodtech i.e., Goodtech and NRC Group go up and down completely randomly.

Pair Corralation between Goodtech and NRC Group

Assuming the 90 days trading horizon Goodtech is expected to under-perform the NRC Group. But the stock apears to be less risky and, when comparing its historical volatility, Goodtech is 1.76 times less risky than NRC Group. The stock trades about -0.07 of its potential returns per unit of risk. The 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 Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Goodtech  vs.  NRC Group ASA

Goodtech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goodtech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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 Goodtech and NRC Group

The main advantage of trading using opposite Goodtech and NRC Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodtech 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 Goodtech 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.