Correlation Between NIBE Industrier and Compagnie

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

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

Diversification Opportunities for NIBE Industrier and Compagnie

-0.68

Correlation Coefficient

NIBE Industrier  Compagnie

Excellent diversification

The 3 months correlation between NIBE and Compagnie is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding NIBE Industrier AB and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint and NIBE Industrier 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 NIBE Industrier AB are associated (or correlated) with Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Saint has no effect on the direction of NIBE Industrier i.e., NIBE Industrier and Compagnie go up and down completely randomly.

Pair Corralation between NIBE Industrier and Compagnie

Assuming the 90 days horizon NIBE Industrier AB is expected to under-perform the Compagnie. In addition to that, NIBE Industrier is 1.72 times more volatile than Compagnie de Saint Gobain. It trades about -0.14 of its total potential returns per unit of risk. Compagnie de Saint Gobain is currently generating about 0.11 per unit of volatility. If you would invest  1,549  in Compagnie de Saint Gobain on January 30, 2024 and sell it today you would earn a total of  57.00  from holding Compagnie de Saint Gobain or generate 3.68% return on investment over 90 days.

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

NIBE Industrier AB  vs.  Compagnie de Saint Gobain

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. Despite uncertain performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Compagnie de Saint

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Compagnie may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with NIBE Industrier and Compagnie

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

The idea behind NIBE Industrier AB and Compagnie de Saint Gobain 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.

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..