Correlation Between NIBE Industrier and Arbonia AG

Can any of the company-specific risk be diversified away by investing in both NIBE Industrier and Arbonia AG 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 Arbonia AG 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 Arbonia AG, you can compare the effects of market volatilities on NIBE Industrier and Arbonia AG 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 Arbonia AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIBE Industrier and Arbonia AG.

Diversification Opportunities for NIBE Industrier and Arbonia AG

-0.65

Correlation Coefficient

NIBE Industrier  Arbonia AG

Excellent diversification

The 3 months correlation between NIBE and Arbonia is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding NIBE Industrier AB and Arbonia AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbonia AG 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 Arbonia AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbonia AG has no effect on the direction of NIBE Industrier i.e., NIBE Industrier and Arbonia AG go up and down completely randomly.

Pair Corralation between NIBE Industrier and Arbonia AG

Assuming the 90 days trading horizon NIBE Industrier AB is expected to generate 1.44 times more return on investment than Arbonia AG. However, NIBE Industrier is 1.44 times more volatile than Arbonia AG. It trades about 0.08 of its potential returns per unit of risk. Arbonia AG is currently generating about 0.08 per unit of risk. If you would invest  414.00  in NIBE Industrier AB on February 4, 2024 and sell it today you would earn a total of  12.00  from holding NIBE Industrier AB or generate 2.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	72.73%
Values	Daily Returns

NIBE Industrier AB  vs.  Arbonia AG

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 abnormal performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Arbonia AG

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arbonia AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arbonia AG showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NIBE Industrier and Arbonia AG

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

The idea behind NIBE Industrier AB and Arbonia AG 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.