Correlation Between New Wave and VBG Group

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

Diversification Opportunities for New Wave and VBG Group

0.81

Correlation Coefficient

New Wave  VBG Group

Very poor diversification

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

Pair Corralation between New Wave and VBG Group

Assuming the 90 days trading horizon New Wave Group is expected to generate 0.97 times more return on investment than VBG Group. However, New Wave Group is 1.03 times less risky than VBG Group. It trades about 0.04 of its potential returns per unit of risk. VBG Group AB is currently generating about -0.05 per unit of risk. If you would invest  9,715  in New Wave Group on December 30, 2024 and sell it today you would earn a total of  345.00  from holding New Wave Group or generate 3.55% 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.  VBG Group 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.

VBG Group AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days VBG Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, VBG Group 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 VBG Group

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

The idea behind New Wave Group and VBG 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.