Correlation Between Nexans SA and NVent Electric

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

By analyzing existing cross correlation between Nexans SA and nVent Electric PLC, you can compare the effects of market volatilities on Nexans SA and NVent Electric 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 Nexans SA with a short position of NVent Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexans SA and NVent Electric.

Diversification Opportunities for Nexans SA and NVent Electric

-0.53

Correlation Coefficient

Nexans SA  NVent Electric

Excellent diversification

The 3 months correlation between Nexans and NVent is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Nexans SA and nVent Electric PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nVent Electric PLC and Nexans SA 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 Nexans SA are associated (or correlated) with NVent Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of nVent Electric PLC has no effect on the direction of Nexans SA i.e., Nexans SA and NVent Electric go up and down completely randomly.

Pair Corralation between Nexans SA and NVent Electric

Assuming the 90 days horizon Nexans SA is expected to under-perform the NVent Electric. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nexans SA is 1.17 times less risky than NVent Electric. The pink sheet trades about -0.16 of its potential returns per unit of risk. The nVent Electric PLC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7,015  in nVent Electric PLC on September 23, 2024 and sell it today you would lose (60.00) from holding nVent Electric PLC or give up 0.86% of portfolio value over 90 days.

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

Nexans SA  vs.  nVent Electric PLC

Nexans SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nexans SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

nVent Electric PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days nVent Electric PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NVent Electric 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 Nexans SA and NVent Electric

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

The idea behind Nexans SA and nVent Electric PLC 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.