Correlation Between Scandinavian Brake and Netcompany Group

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

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

Diversification Opportunities for Scandinavian Brake and Netcompany Group

0.23

Correlation Coefficient

Scandinavian Brake  Netcompany Group

Modest diversification

The 3 months correlation between Scandinavian and Netcompany is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Brake Systems and Netcompany Group AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcompany Group and Scandinavian Brake 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 Scandinavian Brake Systems 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 Scandinavian Brake i.e., Scandinavian Brake and Netcompany Group go up and down completely randomly.

Pair Corralation between Scandinavian Brake and Netcompany Group

Assuming the 90 days trading horizon Scandinavian Brake is expected to generate 2.57 times less return on investment than Netcompany Group. But when comparing it to its historical volatility, Scandinavian Brake Systems is 1.83 times less risky than Netcompany Group. It trades about 0.05 of its potential returns per unit of risk. Netcompany Group AS is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  30,660  in Netcompany Group AS on September 22, 2024 and sell it today you would earn a total of  2,600  from holding Netcompany Group AS or generate 8.48% return on investment over 90 days.

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

Scandinavian Brake Systems  vs.  Netcompany Group AS

Scandinavian Brake

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scandinavian Brake Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Scandinavian Brake is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 Scandinavian Brake and Netcompany Group

The main advantage of trading using opposite Scandinavian Brake and Netcompany Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Brake 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 Scandinavian Brake Systems 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.