Correlation Between Novotek AB and New Wave

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

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

Diversification Opportunities for Novotek AB and New Wave

0.57

Correlation Coefficient

Novotek AB  New Wave

Very weak diversification

The 3 months correlation between Novotek and New is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Novotek AB and New Wave Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Wave Group 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 New Wave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Wave Group has no effect on the direction of Novotek AB i.e., Novotek AB and New Wave go up and down completely randomly.

Pair Corralation between Novotek AB and New Wave

Assuming the 90 days trading horizon Novotek AB is expected to generate 0.87 times more return on investment than New Wave. However, Novotek AB is 1.16 times less risky than New Wave. It trades about 0.21 of its potential returns per unit of risk. New Wave Group is currently generating about 0.13 per unit of risk. If you would invest  6,580  in Novotek AB on November 29, 2024 and sell it today you would earn a total of  1,520  from holding Novotek AB or generate 23.1% 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.  New Wave Group

Novotek AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Novotek AB are ranked lower than 16 (%) 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.

New Wave Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Wave Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, New Wave sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novotek AB and New Wave

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

The idea behind Novotek AB and New Wave Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.