Correlation Between Novotek AB and NAXS Nordic

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

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

Diversification Opportunities for Novotek AB and NAXS Nordic

-0.91

Correlation Coefficient

Novotek AB  NAXS Nordic

Pay attention - limited upside

The 3 months correlation between Novotek and NAXS is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Novotek AB and NAXS Nordic Access in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAXS Nordic Access 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 NAXS Nordic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAXS Nordic Access has no effect on the direction of Novotek AB i.e., Novotek AB and NAXS Nordic go up and down completely randomly.

Pair Corralation between Novotek AB and NAXS Nordic

Assuming the 90 days trading horizon Novotek AB is expected to generate 1.99 times more return on investment than NAXS Nordic. However, Novotek AB is 1.99 times more volatile than NAXS Nordic Access. It trades about 0.07 of its potential returns per unit of risk. NAXS Nordic Access is currently generating about -0.06 per unit of risk. If you would invest  4,643  in Novotek AB on September 26, 2024 and sell it today you would earn a total of  2,537  from holding Novotek AB or generate 54.64% return on investment over 90 days.

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

Novotek AB  vs.  NAXS Nordic Access

Novotek AB

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Novotek AB are ranked lower than 12 (%) 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.

NAXS Nordic Access

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NAXS Nordic Access has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Novotek AB and NAXS Nordic

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

The idea behind Novotek AB and NAXS Nordic Access 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.