Correlation Between New Wave and BE Group

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

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

Diversification Opportunities for New Wave and BE Group

0.81

Correlation Coefficient

New Wave  BE Group

Very poor diversification

The 3 months correlation between New and BEGR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding New Wave Group and BE Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BE Group AB and New Wave 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 New Wave Group are associated (or correlated) with BE Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BE Group AB has no effect on the direction of New Wave i.e., New Wave and BE Group go up and down completely randomly.

Pair Corralation between New Wave and BE Group

Assuming the 90 days trading horizon New Wave Group is expected to under-perform the BE Group. In addition to that, New Wave is 1.43 times more volatile than BE Group AB. It trades about -0.08 of its total potential returns per unit of risk. BE Group AB is currently generating about -0.08 per unit of volatility. If you would invest  5,060  in BE Group AB on August 31, 2024 and sell it today you would lose (415.00) from holding BE Group AB or give up 8.2% of portfolio value over 90 days.

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

New Wave Group  vs.  BE Group AB

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 latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

BE Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BE Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with New Wave and BE Group

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

The idea behind New Wave Group and BE Group AB 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.