Correlation Between Indutrade and Norion Bank

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

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

Diversification Opportunities for Indutrade and Norion Bank

0.73

Correlation Coefficient

Indutrade  Norion Bank

Poor diversification

The 3 months correlation between Indutrade and Norion is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Indutrade AB and Norion Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norion Bank and Indutrade 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 Indutrade 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 Indutrade i.e., Indutrade and Norion Bank go up and down completely randomly.

Pair Corralation between Indutrade and Norion Bank

Assuming the 90 days trading horizon Indutrade AB is expected to under-perform the Norion Bank. But the stock apears to be less risky and, when comparing its historical volatility, Indutrade AB is 1.56 times less risky than Norion Bank. The stock trades about -0.07 of its potential returns per unit of risk. The Norion Bank is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,100  in Norion Bank on September 13, 2024 and sell it today you would lose (165.00) from holding Norion Bank or give up 4.02% of portfolio value over 90 days.

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

Indutrade AB  vs.  Norion Bank

Indutrade AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Norion Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norion Bank has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Indutrade and Norion Bank

The main advantage of trading using opposite Indutrade and Norion Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indutrade 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 Indutrade 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.