Correlation Between Carrier GlobalCorp and NIBE Industrier

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

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

Diversification Opportunities for Carrier GlobalCorp and NIBE Industrier

-0.48

Correlation Coefficient

Carrier GlobalCorp  NIBE Industrier

Very good diversification

The 3 months correlation between Carrier and NIBE is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Carrier GlobalCorp and NIBE Industrier AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIBE Industrier AB and Carrier GlobalCorp 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 Carrier GlobalCorp are associated (or correlated) with NIBE Industrier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIBE Industrier AB has no effect on the direction of Carrier GlobalCorp i.e., Carrier GlobalCorp and NIBE Industrier go up and down completely randomly.

Pair Corralation between Carrier GlobalCorp and NIBE Industrier

Given the investment horizon of 90 days Carrier GlobalCorp is expected to generate 0.47 times more return on investment than NIBE Industrier. However, Carrier GlobalCorp is 2.12 times less risky than NIBE Industrier. It trades about 0.15 of its potential returns per unit of risk. NIBE Industrier AB is currently generating about 0.01 per unit of risk. If you would invest  5,687  in Carrier GlobalCorp on February 14, 2024 and sell it today you would earn a total of  746.00  from holding Carrier GlobalCorp or generate 13.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Carrier GlobalCorp  vs.  NIBE Industrier AB

Carrier GlobalCorp

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carrier GlobalCorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Carrier GlobalCorp reported solid returns over the last few months and may actually be approaching a breakup point.

NIBE Industrier AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIBE Industrier AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Carrier GlobalCorp and NIBE Industrier

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

The idea behind Carrier GlobalCorp and NIBE Industrier 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.