Correlation Between New Wave and Nobia AB

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

Diversification Opportunities for New Wave and Nobia AB

0.71

Correlation Coefficient

New Wave  Nobia AB

Poor diversification

The 3 months correlation between New and Nobia is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding New Wave Group and Nobia AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nobia 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 Nobia AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nobia AB has no effect on the direction of New Wave i.e., New Wave and Nobia AB go up and down completely randomly.

Pair Corralation between New Wave and Nobia AB

Assuming the 90 days trading horizon New Wave Group is expected to under-perform the Nobia AB. But the stock apears to be less risky and, when comparing its historical volatility, New Wave Group is 2.57 times less risky than Nobia AB. The stock trades about -0.43 of its potential returns per unit of risk. The Nobia AB is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  441.00  in Nobia AB on December 10, 2024 and sell it today you would lose (26.00) from holding Nobia AB or give up 5.9% of portfolio value over 90 days.

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

New Wave Group  vs.  Nobia AB

New Wave Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Wave Group are ranked lower than 3 (%) 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.

Nobia AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nobia AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Nobia AB may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with New Wave and Nobia AB

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

The idea behind New Wave Group and Nobia 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.