Correlation Between New Wave and Telenor ASA

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

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

Diversification Opportunities for New Wave and Telenor ASA

-0.01

Correlation Coefficient

New Wave  Telenor ASA

Good diversification

The 3 months correlation between New and Telenor is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding New Wave Holdings and Telenor ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telenor ASA ADR and New Wave 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 New Wave Holdings are associated (or correlated) with Telenor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telenor ASA ADR has no effect on the direction of New Wave i.e., New Wave and Telenor ASA go up and down completely randomly.

Pair Corralation between New Wave and Telenor ASA

Assuming the 90 days horizon New Wave Holdings is expected to generate 19.23 times more return on investment than Telenor ASA. However, New Wave is 19.23 times more volatile than Telenor ASA ADR. It trades about 0.1 of its potential returns per unit of risk. Telenor ASA ADR is currently generating about 0.43 per unit of risk. If you would invest  0.80  in New Wave Holdings on December 19, 2024 and sell it today you would earn a total of  0.32  from holding New Wave Holdings or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

New Wave Holdings  vs.  Telenor ASA ADR

New Wave Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Wave Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, New Wave reported solid returns over the last few months and may actually be approaching a breakup point.

Telenor ASA ADR

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Telenor ASA ADR are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Telenor ASA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Wave and Telenor ASA

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

The idea behind New Wave Holdings and Telenor ASA ADR 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.