Correlation Between Acast AB and Novotek AB

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

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

Diversification Opportunities for Acast AB and Novotek AB

-0.47

Correlation Coefficient

Acast AB  Novotek AB

Very good diversification

The 3 months correlation between Acast and Novotek is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Acast AB and Novotek AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novotek AB and Acast AB 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 Acast AB are associated (or correlated) with Novotek AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novotek AB has no effect on the direction of Acast AB i.e., Acast AB and Novotek AB go up and down completely randomly.

Pair Corralation between Acast AB and Novotek AB

Assuming the 90 days trading horizon Acast AB is expected to generate 1.16 times more return on investment than Novotek AB. However, Acast AB is 1.16 times more volatile than Novotek AB. It trades about 0.04 of its potential returns per unit of risk. Novotek AB is currently generating about 0.03 per unit of risk. If you would invest  1,440  in Acast AB on September 28, 2024 and sell it today you would earn a total of  145.00  from holding Acast AB or generate 10.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.22%
Values	Daily Returns

Acast AB  vs.  Novotek AB

Acast AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acast AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Acast AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Novotek AB

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Novotek AB are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Novotek AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Acast AB and Novotek AB

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

The idea behind Acast AB and Novotek 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.