Correlation Between Napatech and Nel ASA

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

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

Diversification Opportunities for Napatech and Nel ASA

-0.1

Correlation Coefficient

Napatech  Nel ASA

Good diversification

The 3 months correlation between Napatech and Nel is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Napatech AS and Nel ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nel ASA and Napatech 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 Napatech AS are associated (or correlated) with Nel ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nel ASA has no effect on the direction of Napatech i.e., Napatech and Nel ASA go up and down completely randomly.

Pair Corralation between Napatech and Nel ASA

Assuming the 90 days trading horizon Napatech AS is expected to under-perform the Nel ASA. But the stock apears to be less risky and, when comparing its historical volatility, Napatech AS is 2.08 times less risky than Nel ASA. The stock trades about -0.06 of its potential returns per unit of risk. The Nel ASA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  270.00  in Nel ASA on December 30, 2024 and sell it today you would lose (27.00) from holding Nel ASA or give up 10.0% of portfolio value over 90 days.

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

Napatech AS  vs.  Nel ASA

Napatech AS

Risk-Adjusted Performance

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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Nel ASA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nel ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, Nel ASA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Napatech and Nel ASA

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

The idea behind Napatech AS and Nel ASA 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.