Correlation Between Penneo AS and Netcompany Group

Can any of the company-specific risk be diversified away by investing in both Penneo AS and Netcompany Group 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 Penneo AS and Netcompany Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Penneo AS and Netcompany Group

0.7

Correlation Coefficient

Penneo AS  Netcompany Group

Poor diversification

The 3 months correlation between Penneo and Netcompany is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Penneo AS and Netcompany Group AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcompany Group and Penneo AS 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 Penneo AS are associated (or correlated) with Netcompany Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcompany Group has no effect on the direction of Penneo AS i.e., Penneo AS and Netcompany Group go up and down completely randomly.

Pair Corralation between Penneo AS and Netcompany Group

Assuming the 90 days trading horizon Penneo AS is expected to generate 7.96 times more return on investment than Netcompany Group. However, Penneo AS is 7.96 times more volatile than Netcompany Group AS. It trades about 0.21 of its potential returns per unit of risk. Netcompany Group AS is currently generating about -0.04 per unit of risk. If you would invest  802.00  in Penneo AS on September 22, 2024 and sell it today you would earn a total of  773.00  from holding Penneo AS or generate 96.38% return on investment over 90 days.

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

Penneo AS  vs.  Netcompany Group AS

Penneo AS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penneo AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Penneo AS sustained solid returns over the last few months and may actually be approaching a breakup point.

Netcompany Group

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Penneo AS and Netcompany Group

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

The idea behind Penneo AS and Netcompany Group AS 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.