Correlation Between Novotek AB and CellaVision

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

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

Diversification Opportunities for Novotek AB and CellaVision

-0.76

Correlation Coefficient

Novotek AB  CellaVision

Pay attention - limited upside

The 3 months correlation between Novotek and CellaVision is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Novotek AB and CellaVision AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CellaVision 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 CellaVision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CellaVision AB has no effect on the direction of Novotek AB i.e., Novotek AB and CellaVision go up and down completely randomly.

Pair Corralation between Novotek AB and CellaVision

Assuming the 90 days trading horizon Novotek AB is expected to generate 0.79 times more return on investment than CellaVision. However, Novotek AB is 1.27 times less risky than CellaVision. It trades about 0.05 of its potential returns per unit of risk. CellaVision AB is currently generating about 0.02 per unit of risk. If you would invest  4,755  in Novotek AB on August 31, 2024 and sell it today you would earn a total of  1,825  from holding Novotek AB or generate 38.38% 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.  CellaVision 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 current stock price disturbance, may contribute to short-term losses for the investors.

CellaVision AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CellaVision AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Novotek AB and CellaVision

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

The idea behind Novotek AB and CellaVision 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.