Correlation Between NKT AS and Laan Spar

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

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

Diversification Opportunities for NKT AS and Laan Spar

-0.32

Correlation Coefficient

NKT AS  Laan Spar

Very good diversification

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

Pair Corralation between NKT AS and Laan Spar

Assuming the 90 days trading horizon NKT AS is expected to under-perform the Laan Spar. In addition to that, NKT AS is 1.35 times more volatile than Laan Spar Bank. It trades about -0.15 of its total potential returns per unit of risk. Laan Spar Bank is currently generating about 0.01 per unit of volatility. If you would invest  68,000  in Laan Spar Bank on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Laan Spar Bank or generate 0.0% return on investment over 90 days.

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

NKT AS  vs.  Laan Spar Bank

NKT AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NKT AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Laan Spar Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Laan Spar Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Laan Spar is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NKT AS and Laan Spar

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

The idea behind NKT AS and Laan Spar 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..