Correlation Between Nelly Group and Footway Group

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

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

Diversification Opportunities for Nelly Group and Footway Group

-0.76

Correlation Coefficient

Nelly Group  Footway Group

Pay attention - limited upside

The 3 months correlation between Nelly and Footway is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Nelly Group AB and Footway Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Footway Group AB and Nelly Group 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 Nelly Group AB are associated (or correlated) with Footway Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Footway Group AB has no effect on the direction of Nelly Group i.e., Nelly Group and Footway Group go up and down completely randomly.

Pair Corralation between Nelly Group and Footway Group

Assuming the 90 days trading horizon Nelly Group AB is expected to generate 0.4 times more return on investment than Footway Group. However, Nelly Group AB is 2.49 times less risky than Footway Group. It trades about -0.13 of its potential returns per unit of risk. Footway Group AB is currently generating about -0.23 per unit of risk. If you would invest  3,165  in Nelly Group AB on September 12, 2024 and sell it today you would lose (260.00) from holding Nelly Group AB or give up 8.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Nelly Group AB  vs.  Footway Group AB

Nelly Group AB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nelly Group AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nelly Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Footway Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Footway Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Nelly Group and Footway Group

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

The idea behind Nelly Group AB and Footway Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.