Correlation Between NCC AB and Fabege AB

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

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

Diversification Opportunities for NCC AB and Fabege AB

0.32

Correlation Coefficient

NCC AB  Fabege AB

Weak diversification

The 3 months correlation between NCC and Fabege is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding NCC AB and Fabege AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabege AB and NCC 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 NCC AB are associated (or correlated) with Fabege AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fabege AB has no effect on the direction of NCC AB i.e., NCC AB and Fabege AB go up and down completely randomly.

Pair Corralation between NCC AB and Fabege AB

Assuming the 90 days trading horizon NCC AB is expected to generate 0.65 times more return on investment than Fabege AB. However, NCC AB is 1.55 times less risky than Fabege AB. It trades about 0.13 of its potential returns per unit of risk. Fabege AB is currently generating about -0.05 per unit of risk. If you would invest  15,028  in NCC AB on September 4, 2024 and sell it today you would earn a total of  1,392  from holding NCC AB or generate 9.26% return on investment over 90 days.

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

NCC AB  vs.  Fabege AB

NCC AB

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NCC AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NCC AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fabege AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NCC AB and Fabege AB

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

The idea behind NCC AB and Fabege AB 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.