Correlation Between Net Insight and New Wave

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

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

Diversification Opportunities for Net Insight and New Wave

0.55

Correlation Coefficient

Net Insight  New Wave

Very weak diversification

The 3 months correlation between Net and New is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Net Insight AB and New Wave Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Wave Group and Net Insight 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 Net Insight AB are associated (or correlated) with New Wave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Wave Group has no effect on the direction of Net Insight i.e., Net Insight and New Wave go up and down completely randomly.

Pair Corralation between Net Insight and New Wave

Assuming the 90 days trading horizon Net Insight AB is expected to generate 0.99 times more return on investment than New Wave. However, Net Insight AB is 1.01 times less risky than New Wave. It trades about 0.07 of its potential returns per unit of risk. New Wave Group is currently generating about -0.04 per unit of risk. If you would invest  700.00  in Net Insight AB on September 12, 2024 and sell it today you would earn a total of  55.00  from holding Net Insight AB or generate 7.86% return on investment over 90 days.

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

Net Insight AB  vs.  New Wave Group

Net Insight AB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Net Insight AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Net Insight may actually be approaching a critical reversion point that can send shares even higher in January 2025.

New Wave Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Wave Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, New Wave is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Net Insight and New Wave

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

The idea behind Net Insight AB and New Wave Group 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..