Correlation Between New Wave and Clas Ohlson

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

Diversification Opportunities for New Wave and Clas Ohlson

0.83

Correlation Coefficient

New Wave  Clas Ohlson

Very poor diversification

The 3 months correlation between New and Clas is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding New Wave Group and Clas Ohlson AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clas Ohlson 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 Clas Ohlson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clas Ohlson AB has no effect on the direction of New Wave i.e., New Wave and Clas Ohlson go up and down completely randomly.

Pair Corralation between New Wave and Clas Ohlson

Assuming the 90 days trading horizon New Wave is expected to generate 2.99 times less return on investment than Clas Ohlson. But when comparing it to its historical volatility, New Wave Group is 1.1 times less risky than Clas Ohlson. It trades about 0.04 of its potential returns per unit of risk. Clas Ohlson AB is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  20,789  in Clas Ohlson AB on December 30, 2024 and sell it today you would earn a total of  2,851  from holding Clas Ohlson AB or generate 13.71% return on investment over 90 days.

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

New Wave Group  vs.  Clas Ohlson AB

New Wave Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New Wave Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Clas Ohlson AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Clas Ohlson AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clas Ohlson sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Wave and Clas Ohlson

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

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