Correlation Between Novotek AB and Kentima Holding

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

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

Diversification Opportunities for Novotek AB and Kentima Holding

-0.3

Correlation Coefficient

Novotek AB  Kentima Holding

Very good diversification

The 3 months correlation between Novotek and Kentima is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Novotek AB and Kentima Holding publ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kentima Holding 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 Kentima Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kentima Holding publ has no effect on the direction of Novotek AB i.e., Novotek AB and Kentima Holding go up and down completely randomly.

Pair Corralation between Novotek AB and Kentima Holding

Assuming the 90 days trading horizon Novotek AB is expected to generate 2.29 times less return on investment than Kentima Holding. But when comparing it to its historical volatility, Novotek AB is 2.19 times less risky than Kentima Holding. It trades about 0.09 of its potential returns per unit of risk. Kentima Holding publ is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  175.00  in Kentima Holding publ on September 12, 2024 and sell it today you would earn a total of  41.00  from holding Kentima Holding publ or generate 23.43% return on investment over 90 days.

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

Novotek AB  vs.  Kentima Holding publ

Novotek AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Novotek AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Novotek AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kentima Holding publ

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kentima Holding publ are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Kentima Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novotek AB and Kentima Holding

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

The idea behind Novotek AB and Kentima Holding 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .