Correlation Between Novotek AB and BTS Group

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

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

Diversification Opportunities for Novotek AB and BTS Group

-0.69

Correlation Coefficient

Novotek AB  BTS Group

Excellent diversification

The 3 months correlation between Novotek and BTS is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Novotek AB and BTS Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTS Group AB 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 BTS Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTS Group AB has no effect on the direction of Novotek AB i.e., Novotek AB and BTS Group go up and down completely randomly.

Pair Corralation between Novotek AB and BTS Group

Assuming the 90 days trading horizon Novotek AB is expected to generate 1.61 times more return on investment than BTS Group. However, Novotek AB is 1.61 times more volatile than BTS Group AB. It trades about 0.04 of its potential returns per unit of risk. BTS Group AB is currently generating about -0.03 per unit of risk. If you would invest  6,360  in Novotek AB on September 3, 2024 and sell it today you would earn a total of  220.00  from holding Novotek AB or generate 3.46% return on investment over 90 days.

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

Novotek AB  vs.  BTS Group AB

Novotek AB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Novotek AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Novotek AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

BTS Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Novotek AB and BTS 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.