Correlation Between Nordex SE and IDEX

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

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

Diversification Opportunities for Nordex SE and IDEX

-0.62

Correlation Coefficient

Nordex SE  IDEX

Excellent diversification

The 3 months correlation between Nordex and IDEX is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nordex SE and IDEX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEX and Nordex SE 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 Nordex SE are associated (or correlated) with IDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEX has no effect on the direction of Nordex SE i.e., Nordex SE and IDEX go up and down completely randomly.

Pair Corralation between Nordex SE and IDEX

Assuming the 90 days horizon Nordex SE is expected to under-perform the IDEX. In addition to that, Nordex SE is 1.2 times more volatile than IDEX Corporation. It trades about -0.19 of its total potential returns per unit of risk. IDEX Corporation is currently generating about 0.16 per unit of volatility. If you would invest  19,745  in IDEX Corporation on September 12, 2024 and sell it today you would earn a total of  3,050  from holding IDEX Corporation or generate 15.45% return on investment over 90 days.

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

Nordex SE  vs.  IDEX Corp.

Nordex SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordex SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

IDEX

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IDEX Corporation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, IDEX showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordex SE and IDEX

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

The idea behind Nordex SE and IDEX Corporation 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.