Correlation Between Enea AB and Novotek AB

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Can any of the company-specific risk be diversified away by investing in both Enea AB and Novotek AB 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 Enea AB and Novotek AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enea AB and Novotek AB, you can compare the effects of market volatilities on Enea AB and Novotek AB 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 Enea AB with a short position of Novotek AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enea AB and Novotek AB.

Diversification Opportunities for Enea AB and Novotek AB

EneaNovotekDiversified AwayEneaNovotekDiversified Away100%
-0.27
  Correlation Coefficient

Very good diversification

The 3 months correlation between Enea and Novotek is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Enea AB and Novotek AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novotek AB and Enea 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 Enea AB are associated (or correlated) with Novotek AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novotek AB has no effect on the direction of Enea AB i.e., Enea AB and Novotek AB go up and down completely randomly.

Pair Corralation between Enea AB and Novotek AB

Assuming the 90 days trading horizon Enea AB is expected to under-perform the Novotek AB. But the stock apears to be less risky and, when comparing its historical volatility, Enea AB is 1.04 times less risky than Novotek AB. The stock trades about -0.09 of its potential returns per unit of risk. The Novotek AB is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  6,860  in Novotek AB on November 20, 2024 and sell it today you would earn a total of  880.00  from holding Novotek AB or generate 12.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Enea AB  vs.  Novotek AB

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50510
JavaScript chart by amCharts 3.21.15ENEA NTEK-B
       Timeline  
Enea AB 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Enea AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Enea AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb95100105110
Novotek AB 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Novotek AB are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Novotek AB sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb6668707274767880

Enea AB and Novotek AB Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.57-4.92-3.27-1.620.01.63.264.926.588.24 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15ENEA NTEK-B
       Returns  

Pair Trading with Enea AB and Novotek AB

The main advantage of trading using opposite Enea AB and Novotek AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enea AB position performs unexpectedly, Novotek AB 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 Novotek AB will offset losses from the drop in Novotek AB's long position.
The idea behind Enea AB and Novotek AB 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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