Correlation Between Enea AB and Novotek AB

Can any of the company-specific risk be diversified away by investing in both Enea 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 Enea 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 Enea AB and Novotek AB, you can compare the effects of market volatilities on Enea 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 Enea AB with a short position of Novotek AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enea AB and Novotek AB.

Diversification Opportunities for Enea AB and Novotek AB

0.31

Correlation Coefficient

Enea AB  Novotek AB

Weak diversification

The 3 months correlation between Enea and Novotek is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Enea AB and Novotek AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novotek AB and Enea 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 Enea 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 Enea AB i.e., Enea AB and Novotek AB go up and down completely randomly.

Pair Corralation between Enea AB and Novotek AB

Assuming the 90 days trading horizon Enea AB is expected to under-perform the Novotek AB. But the stock apears to be less risky and, when comparing its historical volatility, Enea AB is 1.86 times less risky than Novotek AB. The stock trades about -0.1 of its potential returns per unit of risk. The Novotek AB is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  6,100  in Novotek AB on September 1, 2024 and sell it today you would earn a total of  480.00  from holding Novotek AB or generate 7.87% return on investment over 90 days.

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

Enea AB  vs.  Novotek AB

Enea AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enea AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Enea AB may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Novotek AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Novotek AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Novotek AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Enea AB and Novotek AB

The main advantage of trading using opposite Enea AB and Novotek AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enea 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 Enea 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.