Correlation Between Bjorn Borg and New Wave

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

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

Diversification Opportunities for Bjorn Borg and New Wave

0.45

Correlation Coefficient

Bjorn Borg  New Wave

Very weak diversification

The 3 months correlation between Bjorn and New is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bjorn Borg AB and New Wave Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Wave Group and Bjorn Borg 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 Bjorn Borg AB are associated (or correlated) with New Wave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Wave Group has no effect on the direction of Bjorn Borg i.e., Bjorn Borg and New Wave go up and down completely randomly.

Pair Corralation between Bjorn Borg and New Wave

Assuming the 90 days trading horizon Bjorn Borg AB is expected to generate 0.8 times more return on investment than New Wave. However, Bjorn Borg AB is 1.25 times less risky than New Wave. It trades about -0.16 of its potential returns per unit of risk. New Wave Group is currently generating about -0.23 per unit of risk. If you would invest  5,623  in Bjorn Borg AB on August 31, 2024 and sell it today you would lose (435.00) from holding Bjorn Borg AB or give up 7.74% of portfolio value over 90 days.

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

Bjorn Borg AB  vs.  New Wave Group

Bjorn Borg AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bjorn Borg AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

New Wave Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Wave Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bjorn Borg and New Wave

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

The idea behind Bjorn Borg AB and New Wave Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.