Correlation Between NTG Nordic and Alphabet

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

By analyzing existing cross correlation between NTG Nordic Transport and Alphabet Class A, you can compare the effects of market volatilities on NTG Nordic and Alphabet 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 NTG Nordic with a short position of Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of NTG Nordic and Alphabet.

Diversification Opportunities for NTG Nordic and Alphabet

0.28

Correlation Coefficient

NTG Nordic  Alphabet

Modest diversification

The 3 months correlation between NTG and Alphabet is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding NTG Nordic Transport and Alphabet Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A and NTG Nordic 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 NTG Nordic Transport are associated (or correlated) with Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class A has no effect on the direction of NTG Nordic i.e., NTG Nordic and Alphabet go up and down completely randomly.

Pair Corralation between NTG Nordic and Alphabet

Assuming the 90 days trading horizon NTG Nordic is expected to generate 1.6 times less return on investment than Alphabet. In addition to that, NTG Nordic is 1.41 times more volatile than Alphabet Class A. It trades about 0.07 of its total potential returns per unit of risk. Alphabet Class A is currently generating about 0.15 per unit of volatility. If you would invest  14,085  in Alphabet Class A on September 5, 2024 and sell it today you would earn a total of  2,247  from holding Alphabet Class A or generate 15.95% return on investment over 90 days.

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

NTG Nordic Transport  vs.  Alphabet Class A

NTG Nordic Transport

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NTG Nordic Transport are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, NTG Nordic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alphabet Class A

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Class A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NTG Nordic and Alphabet

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

The idea behind NTG Nordic Transport and Alphabet Class A 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 Commodity Directory module to find actively traded commodities issued by global exchanges.