Correlation Between Techstep ASA and Nordic Technology

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

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

Diversification Opportunities for Techstep ASA and Nordic Technology

-0.49

Correlation Coefficient

Techstep ASA  Nordic Technology

Very good diversification

The 3 months correlation between Techstep and Nordic is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Techstep ASA and Nordic Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Technology and Techstep ASA 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 Techstep ASA are associated (or correlated) with Nordic Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Technology has no effect on the direction of Techstep ASA i.e., Techstep ASA and Nordic Technology go up and down completely randomly.

Pair Corralation between Techstep ASA and Nordic Technology

Assuming the 90 days trading horizon Techstep ASA is expected to generate 0.97 times more return on investment than Nordic Technology. However, Techstep ASA is 1.03 times less risky than Nordic Technology. It trades about 0.01 of its potential returns per unit of risk. Nordic Technology Group is currently generating about -0.27 per unit of risk. If you would invest  1,190  in Techstep ASA on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Techstep ASA or generate 0.0% return on investment over 90 days.

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

Techstep ASA  vs.  Nordic Technology Group

Techstep ASA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Techstep ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Techstep ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nordic Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordic Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Techstep ASA and Nordic Technology

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

The idea behind Techstep ASA and Nordic Technology Group 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.