Correlation Between Nel ASA and Rockwell Automation

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

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

Diversification Opportunities for Nel ASA and Rockwell Automation

-0.83

Correlation Coefficient

Nel ASA  Rockwell Automation

Pay attention - limited upside

The 3 months correlation between Nel and Rockwell is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Nel ASA and Rockwell Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockwell Automation and Nel ASA 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 Nel ASA are associated (or correlated) with Rockwell Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockwell Automation has no effect on the direction of Nel ASA i.e., Nel ASA and Rockwell Automation go up and down completely randomly.

Pair Corralation between Nel ASA and Rockwell Automation

Assuming the 90 days horizon Nel ASA is expected to under-perform the Rockwell Automation. In addition to that, Nel ASA is 2.41 times more volatile than Rockwell Automation. It trades about -0.16 of its total potential returns per unit of risk. Rockwell Automation is currently generating about 0.11 per unit of volatility. If you would invest  26,028  in Rockwell Automation on September 3, 2024 and sell it today you would earn a total of  3,486  from holding Rockwell Automation or generate 13.39% return on investment over 90 days.

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

Nel ASA  vs.  Rockwell Automation

Nel ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nel ASA 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 nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Rockwell Automation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rockwell Automation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Rockwell Automation disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nel ASA and Rockwell Automation

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

The idea behind Nel ASA and Rockwell Automation 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.

Check out your portfolio center.

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.