Correlation Between Newcap Holding and Cemat AS

Can any of the company-specific risk be diversified away by investing in both Newcap Holding and Cemat AS 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 Newcap Holding and Cemat AS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Newcap Holding AS and Cemat AS, you can compare the effects of market volatilities on Newcap Holding and Cemat AS 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 Newcap Holding with a short position of Cemat AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newcap Holding and Cemat AS.

Diversification Opportunities for Newcap Holding and Cemat AS

-0.17

Correlation Coefficient

Newcap Holding  Cemat AS

Good diversification

The 3 months correlation between Newcap and Cemat is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Newcap Holding AS and Cemat AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cemat AS and Newcap Holding 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 Newcap Holding AS are associated (or correlated) with Cemat AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cemat AS has no effect on the direction of Newcap Holding i.e., Newcap Holding and Cemat AS go up and down completely randomly.

Pair Corralation between Newcap Holding and Cemat AS

Assuming the 90 days trading horizon Newcap Holding AS is expected to generate 6.23 times more return on investment than Cemat AS. However, Newcap Holding is 6.23 times more volatile than Cemat AS. It trades about 0.02 of its potential returns per unit of risk. Cemat AS is currently generating about 0.04 per unit of risk. If you would invest  21.00  in Newcap Holding AS on October 4, 2024 and sell it today you would lose (12.00) from holding Newcap Holding AS or give up 57.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.7%
Values	Daily Returns

Newcap Holding AS  vs.  Cemat AS

Newcap Holding AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newcap Holding AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Newcap Holding is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Cemat AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cemat AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Newcap Holding and Cemat AS

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

The idea behind Newcap Holding AS and Cemat AS 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.