Correlation Between RoboGroup TEK and NVent Electric

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

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

Diversification Opportunities for RoboGroup TEK and NVent Electric

0.86

Correlation Coefficient

RoboGroup TEK  NVent Electric

Very poor diversification

The 3 months correlation between RoboGroup and NVent is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding RoboGroup TEK 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 RoboGroup TEK 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 RoboGroup TEK 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 RoboGroup TEK i.e., RoboGroup TEK and NVent Electric go up and down completely randomly.

Pair Corralation between RoboGroup TEK and NVent Electric

If you would invest  6,915  in nVent Electric PLC on February 5, 2024 and sell it today you would earn a total of  674.00  from holding nVent Electric PLC or generate 9.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	44.19%
Values	Daily Returns

RoboGroup TEK  vs.  nVent Electric PLC

RoboGroup TEK

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days RoboGroup TEK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unfluctuating basic indicators, RoboGroup TEK reported solid returns over the last few months and may actually be approaching a breakup point.

nVent Electric PLC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in nVent Electric PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, NVent Electric unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RoboGroup TEK and NVent Electric

The main advantage of trading using opposite RoboGroup TEK and NVent Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RoboGroup TEK 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 RoboGroup TEK 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.