Correlation Between Novotek AB and Divio Technologies

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

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

Diversification Opportunities for Novotek AB and Divio Technologies

-0.6

Correlation Coefficient

Novotek AB  Divio Technologies

Excellent diversification

The 3 months correlation between Novotek and Divio is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Novotek AB and Divio Technologies AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Divio Technologies 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 Divio Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Divio Technologies has no effect on the direction of Novotek AB i.e., Novotek AB and Divio Technologies go up and down completely randomly.

Pair Corralation between Novotek AB and Divio Technologies

Assuming the 90 days trading horizon Novotek AB is expected to generate 0.34 times more return on investment than Divio Technologies. However, Novotek AB is 2.93 times less risky than Divio Technologies. It trades about 0.23 of its potential returns per unit of risk. Divio Technologies AB is currently generating about 0.0 per unit of risk. If you would invest  5,800  in Novotek AB on October 10, 2024 and sell it today you would earn a total of  1,820  from holding Novotek AB or generate 31.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Novotek AB  vs.  Divio Technologies AB

Novotek AB

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Novotek AB are ranked lower than 18 (%) 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.

Divio Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Novotek AB and Divio Technologies

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

The idea behind Novotek AB and Divio Technologies 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.