Correlation Between Hexagon AB and Norion Bank

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

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

Diversification Opportunities for Hexagon AB and Norion Bank

0.79

Correlation Coefficient

Hexagon AB  Norion Bank

Poor diversification

The 3 months correlation between Hexagon and Norion is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Hexagon AB and Norion Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norion Bank and Hexagon AB 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 Hexagon AB are associated (or correlated) with Norion Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norion Bank has no effect on the direction of Hexagon AB i.e., Hexagon AB and Norion Bank go up and down completely randomly.

Pair Corralation between Hexagon AB and Norion Bank

Assuming the 90 days trading horizon Hexagon AB is expected to under-perform the Norion Bank. But the stock apears to be less risky and, when comparing its historical volatility, Hexagon AB is 1.12 times less risky than Norion Bank. The stock trades about -0.03 of its potential returns per unit of risk. The Norion Bank is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,035  in Norion Bank on September 5, 2024 and sell it today you would earn a total of  15.00  from holding Norion Bank or generate 0.37% return on investment over 90 days.

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

Hexagon AB  vs.  Norion Bank

Hexagon AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hexagon AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hexagon AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Norion Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Norion Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Norion Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hexagon AB and Norion Bank

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

The idea behind Hexagon AB and Norion Bank 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.