Correlation Between Logistea A and New Wave

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

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

Diversification Opportunities for Logistea A and New Wave

-0.11

Correlation Coefficient

Logistea A  New Wave

Good diversification

The 3 months correlation between Logistea and New is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Logistea A 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 Logistea A 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 Logistea A 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 Logistea A i.e., Logistea A and New Wave go up and down completely randomly.

Pair Corralation between Logistea A and New Wave

Assuming the 90 days trading horizon Logistea A is expected to under-perform the New Wave. But the stock apears to be less risky and, when comparing its historical volatility, Logistea A is 1.21 times less risky than New Wave. The stock trades about -0.04 of its potential returns per unit of risk. The New Wave Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9,935  in New Wave Group on December 1, 2024 and sell it today you would earn a total of  1,015  from holding New Wave Group or generate 10.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Logistea A  vs.  New Wave Group

Logistea A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Logistea A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Logistea A is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

New Wave Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Wave Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, New Wave may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Logistea A and New Wave

The main advantage of trading using opposite Logistea A and New Wave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Logistea A 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 Logistea A 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.