Correlation Between Know IT and NCAB

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

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

Diversification Opportunities for Know IT and NCAB

-0.04

Correlation Coefficient

Know IT  NCAB

Good diversification

The 3 months correlation between Know and NCAB is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Know IT AB and NCAB Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCAB Group and Know IT 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 Know IT AB are associated (or correlated) with NCAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCAB Group has no effect on the direction of Know IT i.e., Know IT and NCAB go up and down completely randomly.

Pair Corralation between Know IT and NCAB

Assuming the 90 days trading horizon Know IT AB is expected to under-perform the NCAB. But the stock apears to be less risky and, when comparing its historical volatility, Know IT AB is 1.38 times less risky than NCAB. The stock trades about -0.08 of its potential returns per unit of risk. The NCAB Group is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  8,270  in NCAB Group on October 13, 2024 and sell it today you would lose (1,825) from holding NCAB Group or give up 22.07% of portfolio value over 90 days.

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

Know IT AB  vs.  NCAB Group

Know IT AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Know IT AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

NCAB Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NCAB Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NCAB may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Know IT and NCAB

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

The idea behind Know IT AB and NCAB 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.