Correlation Between CAG Group and Novotek AB

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

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

Diversification Opportunities for CAG Group and Novotek AB

-0.05

Correlation Coefficient

CAG Group  Novotek AB

Good diversification

The 3 months correlation between CAG and Novotek is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding CAG Group AB and Novotek AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novotek AB and CAG Group 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 CAG Group 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 CAG Group i.e., CAG Group and Novotek AB go up and down completely randomly.

Pair Corralation between CAG Group and Novotek AB

Assuming the 90 days trading horizon CAG Group AB is expected to under-perform the Novotek AB. But the stock apears to be less risky and, when comparing its historical volatility, CAG Group AB is 1.61 times less risky than Novotek AB. The stock trades about -0.05 of its potential returns per unit of risk. The Novotek AB is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  6,640  in Novotek AB on November 20, 2024 and sell it today you would earn a total of  1,140  from holding Novotek AB or generate 17.17% return on investment over 90 days.

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

CAG Group AB  vs.  Novotek AB

CAG Group AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAG Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, CAG Group 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

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Novotek AB are ranked lower than 13 (%) 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 CAG Group and Novotek AB

The main advantage of trading using opposite CAG Group and Novotek AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAG Group 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 CAG Group 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.