Correlation Between Norion Bank and Indutrade

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

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

Diversification Opportunities for Norion Bank and Indutrade

0.73

Correlation Coefficient

Norion Bank  Indutrade

Poor diversification

The 3 months correlation between Norion and Indutrade is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Norion Bank and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB and Norion Bank 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 Norion Bank are associated (or correlated) with Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of Norion Bank i.e., Norion Bank and Indutrade go up and down completely randomly.

Pair Corralation between Norion Bank and Indutrade

Assuming the 90 days trading horizon Norion Bank is expected to generate 1.55 times more return on investment than Indutrade. However, Norion Bank is 1.55 times more volatile than Indutrade AB. It trades about 0.0 of its potential returns per unit of risk. Indutrade AB is currently generating about -0.07 per unit of risk. If you would invest  4,075  in Norion Bank on September 12, 2024 and sell it today you would lose (40.00) from holding Norion Bank or give up 0.98% of portfolio value over 90 days.

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

Norion Bank  vs.  Indutrade AB

Norion Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norion Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Norion Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Indutrade AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indutrade AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Indutrade is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Norion Bank and Indutrade

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

The idea behind Norion Bank and Indutrade 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.