Correlation Between Micro Systemation and Novotek AB

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

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

Diversification Opportunities for Micro Systemation and Novotek AB

0.47

Correlation Coefficient

Micro Systemation  Novotek AB

Very weak diversification

The 3 months correlation between Micro and Novotek is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Micro Systemation AB and Novotek AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novotek AB and Micro Systemation 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 Micro Systemation 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 Micro Systemation i.e., Micro Systemation and Novotek AB go up and down completely randomly.

Pair Corralation between Micro Systemation and Novotek AB

Assuming the 90 days trading horizon Micro Systemation AB is expected to generate 1.13 times more return on investment than Novotek AB. However, Micro Systemation is 1.13 times more volatile than Novotek AB. It trades about 0.11 of its potential returns per unit of risk. Novotek AB is currently generating about 0.03 per unit of risk. If you would invest  4,367  in Micro Systemation AB on August 31, 2024 and sell it today you would earn a total of  733.00  from holding Micro Systemation AB or generate 16.78% return on investment over 90 days.

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

Micro Systemation AB  vs.  Novotek AB

Micro Systemation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Systemation AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Micro Systemation sustained solid returns over the last few months and may actually be approaching a breakup point.

Novotek AB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Novotek AB are ranked lower than 2 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Micro Systemation and Novotek AB

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

Check out your portfolio center.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.