Correlation Between Peab AB and NCC AB

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

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

Diversification Opportunities for Peab AB and NCC AB

0.19

Correlation Coefficient

Peab AB  NCC AB

Average diversification

The 3 months correlation between Peab and NCC is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Peab AB and NCC AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCC AB and Peab AB 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 Peab AB are associated (or correlated) with NCC AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCC AB has no effect on the direction of Peab AB i.e., Peab AB and NCC AB go up and down completely randomly.

Pair Corralation between Peab AB and NCC AB

Assuming the 90 days trading horizon Peab AB is expected to generate 1.04 times less return on investment than NCC AB. In addition to that, Peab AB is 1.18 times more volatile than NCC AB. It trades about 0.1 of its total potential returns per unit of risk. NCC AB is currently generating about 0.12 per unit of volatility. If you would invest  13,419  in NCC AB on September 12, 2024 and sell it today you would earn a total of  3,131  from holding NCC AB or generate 23.33% return on investment over 90 days.

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

Peab AB  vs.  NCC AB

Peab AB

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Peab AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Peab AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NCC AB

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NCC AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NCC AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Peab AB and NCC AB

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

The idea behind Peab AB and NCC 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.