Correlation Between NN Group and BB Seguridade

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

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

Diversification Opportunities for NN Group and BB Seguridade

0.67

Correlation Coefficient

NN Group  BB Seguridade

Poor diversification

The 3 months correlation between NNGPF and BBSEY is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding NN Group NV and BB Seguridade Participacoes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BB Seguridade Partic and NN 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 NN Group NV are associated (or correlated) with BB Seguridade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BB Seguridade Partic has no effect on the direction of NN Group i.e., NN Group and BB Seguridade go up and down completely randomly.

Pair Corralation between NN Group and BB Seguridade

Assuming the 90 days horizon NN Group NV is expected to under-perform the BB Seguridade. But the pink sheet apears to be less risky and, when comparing its historical volatility, NN Group NV is 1.6 times less risky than BB Seguridade. The pink sheet trades about -0.13 of its potential returns per unit of risk. The BB Seguridade Participacoes is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  642.00  in BB Seguridade Participacoes on September 12, 2024 and sell it today you would lose (31.00) from holding BB Seguridade Participacoes or give up 4.83% of portfolio value over 90 days.

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

NN Group NV  vs.  BB Seguridade Participacoes

NN Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NN Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

BB Seguridade Partic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BB Seguridade Participacoes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, BB Seguridade is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NN Group and BB Seguridade

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

The idea behind NN Group NV and BB Seguridade Participacoes 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.