Correlation Between NTG Nordic and Carsales

Can any of the company-specific risk be diversified away by investing in both NTG Nordic and Carsales 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 Carsales 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 CarsalesCom, you can compare the effects of market volatilities on NTG Nordic and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of NTG Nordic and Carsales.

Diversification Opportunities for NTG Nordic and Carsales

0.26

Correlation Coefficient

NTG Nordic  Carsales

Modest diversification

The 3 months correlation between NTG and Carsales is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NTG Nordic Transport and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of NTG Nordic i.e., NTG Nordic and Carsales go up and down completely randomly.

Pair Corralation between NTG Nordic and Carsales

Assuming the 90 days trading horizon NTG Nordic is expected to generate 1.68 times less return on investment than Carsales. In addition to that, NTG Nordic is 1.63 times more volatile than CarsalesCom. It trades about 0.07 of its total potential returns per unit of risk. CarsalesCom is currently generating about 0.2 per unit of volatility. If you would invest  2,142  in CarsalesCom on September 4, 2024 and sell it today you would earn a total of  398.00  from holding CarsalesCom or generate 18.58% 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.  CarsalesCom

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 fragile basic indicators, NTG Nordic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CarsalesCom

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Carsales reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NTG Nordic and Carsales

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

The idea behind NTG Nordic Transport and CarsalesCom 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.