Correlation Between Novotek AB and AAC Clyde

Can any of the company-specific risk be diversified away by investing in both Novotek AB and AAC Clyde 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 Novotek AB and AAC Clyde into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Novotek AB and AAC Clyde Space, you can compare the effects of market volatilities on Novotek AB and AAC Clyde 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 Novotek AB with a short position of AAC Clyde. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novotek AB and AAC Clyde.

Diversification Opportunities for Novotek AB and AAC Clyde

0.92

Correlation Coefficient

Novotek AB  AAC Clyde

Almost no diversification

The 3 months correlation between Novotek and AAC is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Novotek AB and AAC Clyde Space in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAC Clyde Space and Novotek AB 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 Novotek AB are associated (or correlated) with AAC Clyde. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAC Clyde Space has no effect on the direction of Novotek AB i.e., Novotek AB and AAC Clyde go up and down completely randomly.

Pair Corralation between Novotek AB and AAC Clyde

Assuming the 90 days trading horizon Novotek AB is expected to generate 1.6 times less return on investment than AAC Clyde. But when comparing it to its historical volatility, Novotek AB is 1.47 times less risky than AAC Clyde. It trades about 0.03 of its potential returns per unit of risk. AAC Clyde Space is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,240  in AAC Clyde Space on September 28, 2024 and sell it today you would earn a total of  410.00  from holding AAC Clyde Space or generate 9.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.22%
Values	Daily Returns

Novotek AB  vs.  AAC Clyde Space

Novotek AB

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Novotek AB are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Novotek AB sustained solid returns over the last few months and may actually be approaching a breakup point.

AAC Clyde Space

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AAC Clyde Space are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, AAC Clyde unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novotek AB and AAC Clyde

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

The idea behind Novotek AB and AAC Clyde Space 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.