Correlation Between Online Brands and New Wave

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

By analyzing existing cross correlation between Online Brands Nordic and New Wave Group, you can compare the effects of market volatilities on Online Brands 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 Online Brands with a short position of New Wave. Check out your portfolio center. Please also check ongoing floating volatility patterns of Online Brands and New Wave.

Diversification Opportunities for Online Brands and New Wave

0.58

Correlation Coefficient

Online Brands  New Wave

Very weak diversification

The 3 months correlation between Online and New is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Online Brands Nordic 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 Online Brands 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 Online Brands Nordic 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 Online Brands i.e., Online Brands and New Wave go up and down completely randomly.

Pair Corralation between Online Brands and New Wave

Assuming the 90 days trading horizon Online Brands Nordic is expected to under-perform the New Wave. In addition to that, Online Brands is 1.45 times more volatile than New Wave Group. It trades about -0.01 of its total potential returns per unit of risk. New Wave Group is currently generating about 0.12 per unit of volatility. If you would invest  9,920  in New Wave Group on December 2, 2024 and sell it today you would earn a total of  1,030  from holding New Wave Group or generate 10.38% return on investment over 90 days.

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

Online Brands Nordic  vs.  New Wave Group

Online Brands Nordic

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Online Brands Nordic are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Online Brands unveiled 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 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, New Wave may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Online Brands and New Wave

The main advantage of trading using opposite Online Brands and New Wave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Online Brands 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 Online Brands Nordic 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.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..