Correlation Between Prevas AB and NCAB

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

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

Diversification Opportunities for Prevas AB and NCAB

0.4

Correlation Coefficient

Prevas AB  NCAB

Very weak diversification

The 3 months correlation between Prevas and NCAB is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Prevas AB and NCAB Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCAB Group and Prevas 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 Prevas AB are associated (or correlated) with NCAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCAB Group has no effect on the direction of Prevas AB i.e., Prevas AB and NCAB go up and down completely randomly.

Pair Corralation between Prevas AB and NCAB

Assuming the 90 days trading horizon Prevas AB is expected to generate 0.83 times more return on investment than NCAB. However, Prevas AB is 1.2 times less risky than NCAB. It trades about -0.05 of its potential returns per unit of risk. NCAB Group is currently generating about -0.06 per unit of risk. If you would invest  13,600  in Prevas AB on September 24, 2024 and sell it today you would lose (2,200) from holding Prevas AB or give up 16.18% of portfolio value over 90 days.

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

Prevas AB  vs.  NCAB Group

Prevas AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prevas AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

NCAB Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NCAB Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NCAB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Prevas AB and NCAB

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

The idea behind Prevas AB and NCAB 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.