Correlation Between Napatech and Vow ASA

Can any of the company-specific risk be diversified away by investing in both Napatech and Vow 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 Vow 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 Vow ASA, you can compare the effects of market volatilities on Napatech and Vow 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 Vow ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Napatech and Vow ASA.

Diversification Opportunities for Napatech and Vow ASA

0.76

Correlation Coefficient

Napatech  Vow ASA

Poor diversification

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

Pair Corralation between Napatech and Vow ASA

Assuming the 90 days trading horizon Napatech AS is expected to under-perform the Vow ASA. But the stock apears to be less risky and, when comparing its historical volatility, Napatech AS is 4.2 times less risky than Vow ASA. The stock trades about -0.19 of its potential returns per unit of risk. The Vow ASA is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  218.00  in Vow ASA on September 16, 2024 and sell it today you would lose (33.00) from holding Vow ASA or give up 15.14% 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.  Vow ASA

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.

Vow ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vow ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Vow ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Napatech and Vow ASA

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

The idea behind Napatech AS and Vow 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.

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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 CEOs Directory module to screen CEOs from public companies around the world.