Correlation Between IA Financial and NN Group

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

By analyzing existing cross correlation between iA Financial and NN Group NV, you can compare the effects of market volatilities on IA Financial and NN Group 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 IA Financial with a short position of NN Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of IA Financial and NN Group.

Diversification Opportunities for IA Financial and NN Group

-0.55

Correlation Coefficient

IA Financial  NN Group

Excellent diversification

The 3 months correlation between IAFNF and NNGPF is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding iA Financial and NN Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NN Group NV and IA Financial 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 iA Financial are associated (or correlated) with NN Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NN Group NV has no effect on the direction of IA Financial i.e., IA Financial and NN Group go up and down completely randomly.

Pair Corralation between IA Financial and NN Group

Assuming the 90 days horizon iA Financial is expected to generate 2.09 times more return on investment than NN Group. However, IA Financial is 2.09 times more volatile than NN Group NV. It trades about 0.25 of its potential returns per unit of risk. NN Group NV is currently generating about -0.3 per unit of risk. If you would invest  8,182  in iA Financial on September 2, 2024 and sell it today you would earn a total of  1,148  from holding iA Financial or generate 14.03% return on investment over 90 days.

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

iA Financial  vs.  NN Group NV

iA Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iA Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, IA Financial reported solid returns over the last few months and may actually be approaching a breakup point.

NN Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NN Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NN Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IA Financial and NN Group

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

The idea behind iA Financial and NN Group NV 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.