Correlation Between Idex ASA and Napatech

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

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

Diversification Opportunities for Idex ASA and Napatech

0.59

Correlation Coefficient

Idex ASA  Napatech

Very weak diversification

The 3 months correlation between Idex and Napatech is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Idex ASA and Napatech AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Napatech AS and Idex ASA 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 Idex ASA are associated (or correlated) with Napatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Napatech AS has no effect on the direction of Idex ASA i.e., Idex ASA and Napatech go up and down completely randomly.

Pair Corralation between Idex ASA and Napatech

Assuming the 90 days trading horizon Idex ASA is expected to under-perform the Napatech. In addition to that, Idex ASA is 2.77 times more volatile than Napatech AS. It trades about -0.19 of its total potential returns per unit of risk. Napatech AS is currently generating about -0.2 per unit of volatility. If you would invest  3,240  in Napatech AS on September 3, 2024 and sell it today you would lose (1,020) from holding Napatech AS or give up 31.48% of portfolio value over 90 days.

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

Idex ASA  vs.  Napatech AS

Idex ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Idex ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Napatech AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Napatech AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Idex ASA and Napatech

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

The idea behind Idex ASA and Napatech AS 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.