Correlation Between Napatech and Sparebanken Ost

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

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

Diversification Opportunities for Napatech and Sparebanken Ost

-0.93

Correlation Coefficient

Napatech  Sparebanken Ost

Pay attention - limited upside

The 3 months correlation between Napatech and Sparebanken is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Napatech AS and Sparebanken Ost in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebanken Ost 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 Sparebanken Ost. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebanken Ost has no effect on the direction of Napatech i.e., Napatech and Sparebanken Ost go up and down completely randomly.

Pair Corralation between Napatech and Sparebanken Ost

Assuming the 90 days trading horizon Napatech AS is expected to under-perform the Sparebanken Ost. In addition to that, Napatech is 1.84 times more volatile than Sparebanken Ost. It trades about -0.19 of its total potential returns per unit of risk. Sparebanken Ost is currently generating about 0.13 per unit of volatility. If you would invest  5,945  in Sparebanken Ost on September 14, 2024 and sell it today you would earn a total of  698.00  from holding Sparebanken Ost or generate 11.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Napatech AS  vs.  Sparebanken Ost

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.

Sparebanken Ost

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Ost are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sparebanken Ost may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Napatech and Sparebanken Ost

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

The idea behind Napatech AS and Sparebanken Ost 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.