Correlation Between Napatech and RomReal

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

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

Diversification Opportunities for Napatech and RomReal

0.76

Correlation Coefficient

Napatech  RomReal

Poor diversification

The 3 months correlation between Napatech and RomReal is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Napatech AS and RomReal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RomReal Limited 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 RomReal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RomReal Limited has no effect on the direction of Napatech i.e., Napatech and RomReal go up and down completely randomly.

Pair Corralation between Napatech and RomReal

Assuming the 90 days trading horizon Napatech AS is expected to under-perform the RomReal. But the stock apears to be less risky and, when comparing its historical volatility, Napatech AS is 2.05 times less risky than RomReal. The stock trades about -0.19 of its potential returns per unit of risk. The RomReal Limited is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  340.00  in RomReal Limited on September 17, 2024 and sell it today you would lose (68.00) from holding RomReal Limited or give up 20.0% of portfolio value over 90 days.

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

Napatech AS  vs.  RomReal Limited

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.

RomReal Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RomReal Limited 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 primary 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 Napatech and RomReal

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

The idea behind Napatech AS and RomReal Limited 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..