Correlation Between Novotek AB and Generic Sweden

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

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

Diversification Opportunities for Novotek AB and Generic Sweden

0.42

Correlation Coefficient

Novotek AB  Generic Sweden

Very weak diversification

The 3 months correlation between Novotek and Generic is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Novotek AB and Generic Sweden publ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generic Sweden publ 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 Generic Sweden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generic Sweden publ has no effect on the direction of Novotek AB i.e., Novotek AB and Generic Sweden go up and down completely randomly.

Pair Corralation between Novotek AB and Generic Sweden

Assuming the 90 days trading horizon Novotek AB is expected to generate 1.6 times less return on investment than Generic Sweden. In addition to that, Novotek AB is 1.1 times more volatile than Generic Sweden publ. It trades about 0.04 of its total potential returns per unit of risk. Generic Sweden publ is currently generating about 0.07 per unit of volatility. If you would invest  4,580  in Generic Sweden publ on September 3, 2024 and sell it today you would earn a total of  330.00  from holding Generic Sweden publ or generate 7.21% return on investment over 90 days.

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

Novotek AB  vs.  Generic Sweden publ

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.

Generic Sweden publ

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Sweden publ are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Generic Sweden may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Novotek AB and Generic Sweden

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

The idea behind Novotek AB and Generic Sweden publ 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.