Correlation Between New Wave and Soder Sportfiske

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

Diversification Opportunities for New Wave and Soder Sportfiske

0.39

Correlation Coefficient

New Wave  Soder Sportfiske

Weak diversification

The 3 months correlation between New and Soder is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding New Wave Group and Soder Sportfiske AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soder Sportfiske 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 Soder Sportfiske. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soder Sportfiske has no effect on the direction of New Wave i.e., New Wave and Soder Sportfiske go up and down completely randomly.

Pair Corralation between New Wave and Soder Sportfiske

Assuming the 90 days trading horizon New Wave is expected to generate 1.94 times less return on investment than Soder Sportfiske. But when comparing it to its historical volatility, New Wave Group is 1.44 times less risky than Soder Sportfiske. It trades about 0.01 of its potential returns per unit of risk. Soder Sportfiske AB is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,616  in Soder Sportfiske AB on September 24, 2024 and sell it today you would lose (156.00) from holding Soder Sportfiske AB or give up 5.96% of portfolio value over 90 days.

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

New Wave Group  vs.  Soder Sportfiske 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.

Soder Sportfiske

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soder Sportfiske AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Soder Sportfiske is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with New Wave and Soder Sportfiske

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

The idea behind New Wave Group and Soder Sportfiske 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.