Correlation Between New Wave and Fagerhult

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

Diversification Opportunities for New Wave and Fagerhult

-0.73

Correlation Coefficient

New Wave  Fagerhult

Pay attention - limited upside

The 3 months correlation between New and Fagerhult is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding New Wave Group and Fagerhult AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fagerhult 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 Fagerhult. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fagerhult AB has no effect on the direction of New Wave i.e., New Wave and Fagerhult go up and down completely randomly.

Pair Corralation between New Wave and Fagerhult

Assuming the 90 days trading horizon New Wave Group is expected to generate 1.2 times more return on investment than Fagerhult. However, New Wave is 1.2 times more volatile than Fagerhult AB. It trades about 0.13 of its potential returns per unit of risk. Fagerhult AB is currently generating about -0.18 per unit of risk. If you would invest  9,675  in New Wave Group on November 29, 2024 and sell it today you would earn a total of  1,525  from holding New Wave Group or generate 15.76% return on investment over 90 days.

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

New Wave Group  vs.  Fagerhult AB

New Wave Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Wave Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, New Wave sustained solid returns over the last few months and may actually be approaching a breakup point.

Fagerhult AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fagerhult AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with New Wave and Fagerhult

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

The idea behind New Wave Group and Fagerhult 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.