Correlation Between NKT AS and Schouw

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

By analyzing existing cross correlation between NKT AS and Schouw Co, you can compare the effects of market volatilities on NKT AS and Schouw 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 Schouw. Check out your portfolio center. Please also check ongoing floating volatility patterns of NKT AS and Schouw.

Diversification Opportunities for NKT AS and Schouw

0.82

Correlation Coefficient

NKT AS  Schouw

Very poor diversification

The 3 months correlation between NKT and Schouw is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding NKT AS and Schouw Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schouw 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 Schouw. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schouw has no effect on the direction of NKT AS i.e., NKT AS and Schouw go up and down completely randomly.

Pair Corralation between NKT AS and Schouw

Assuming the 90 days trading horizon NKT AS is expected to under-perform the Schouw. In addition to that, NKT AS is 1.84 times more volatile than Schouw Co. It trades about -0.15 of its total potential returns per unit of risk. Schouw Co is currently generating about -0.09 per unit of volatility. If you would invest  58,400  in Schouw Co on September 13, 2024 and sell it today you would lose (3,600) from holding Schouw Co or give up 6.16% of portfolio value over 90 days.

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

NKT AS  vs.  Schouw Co

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.

Schouw

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schouw Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Schouw 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 Schouw

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

The idea behind NKT AS and Schouw Co 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.