Correlation Between FREYR Battery and NVent Electric

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

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

Diversification Opportunities for FREYR Battery and NVent Electric

0.67

Correlation Coefficient

FREYR Battery  NVent Electric

Poor diversification

The 3 months correlation between FREYR and NVent is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding FREYR Battery SA 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 FREYR Battery 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 FREYR Battery SA 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 FREYR Battery i.e., FREYR Battery and NVent Electric go up and down completely randomly.

Pair Corralation between FREYR Battery and NVent Electric

Given the investment horizon of 90 days FREYR Battery SA is expected to under-perform the NVent Electric. In addition to that, FREYR Battery is 1.98 times more volatile than nVent Electric PLC. It trades about -0.5 of its total potential returns per unit of risk. nVent Electric PLC is currently generating about -0.21 per unit of volatility. If you would invest  8,328  in nVent Electric PLC on March 28, 2024 and sell it today you would lose (759.00) from holding nVent Electric PLC or give up 9.11% of portfolio value over 90 days.

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

FREYR Battery SA  vs.  nVent Electric PLC

FREYR Battery SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FREYR Battery SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, FREYR Battery is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

nVent Electric PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in nVent Electric PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, NVent Electric is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with FREYR Battery and NVent Electric

The main advantage of trading using opposite FREYR Battery and NVent Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FREYR Battery 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 FREYR Battery SA 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.