Correlation Between Napatech and Techstep ASA
Can any of the company-specific risk be diversified away by investing in both Napatech and Techstep 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 Napatech and Techstep ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Napatech AS and Techstep ASA, you can compare the effects of market volatilities on Napatech and Techstep 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 Napatech with a short position of Techstep ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Napatech and Techstep ASA.
Diversification Opportunities for Napatech and Techstep ASA
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Napatech and Techstep is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Napatech AS and Techstep ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techstep ASA and Napatech 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 Napatech AS are associated (or correlated) with Techstep ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techstep ASA has no effect on the direction of Napatech i.e., Napatech and Techstep ASA go up and down completely randomly.
Pair Corralation between Napatech and Techstep ASA
Assuming the 90 days trading horizon Napatech AS is expected to under-perform the Techstep ASA. In addition to that, Napatech is 1.36 times more volatile than Techstep ASA. It trades about -0.06 of its total potential returns per unit of risk. Techstep ASA is currently generating about -0.03 per unit of volatility. If you would invest 1,320 in Techstep ASA on November 27, 2024 and sell it today you would lose (20.00) from holding Techstep ASA or give up 1.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Napatech AS vs. Techstep ASA
Performance |
| Timeline |
| Napatech AS |
| Techstep ASA |
Napatech and Techstep ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Napatech and Techstep ASA
The main advantage of trading using opposite Napatech and Techstep ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Napatech position performs unexpectedly, Techstep 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 Techstep ASA will offset losses from the drop in Techstep ASA's long position.| Napatech vs. Idex ASA | Napatech vs. Next Biometrics Group | Napatech vs. Polight ASA | Napatech vs. Kitron ASA |
| Techstep ASA vs. Next Biometrics Group | Techstep ASA vs. Zalaris ASA | Techstep ASA vs. NRC Group ASA | Techstep ASA vs. Goodtech |
Check out your portfolio center.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.
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