Correlation Between New Wave and Bulten AB
Can any of the company-specific risk be diversified away by investing in both New Wave and Bulten 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 New Wave and Bulten AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Wave Group and Bulten AB, you can compare the effects of market volatilities on New Wave and Bulten 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 New Wave with a short position of Bulten AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Wave and Bulten AB.
Diversification Opportunities for New Wave and Bulten AB
Modest diversification
The 3 months correlation between New and Bulten is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding New Wave Group and Bulten AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bulten AB 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 Group are associated (or correlated) with Bulten AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bulten AB has no effect on the direction of New Wave i.e., New Wave and Bulten AB go up and down completely randomly.
Pair Corralation between New Wave and Bulten AB
Assuming the 90 days trading horizon New Wave Group is expected to under-perform the Bulten AB. In addition to that, New Wave is 1.36 times more volatile than Bulten AB. It trades about -0.26 of its total potential returns per unit of risk. Bulten AB is currently generating about -0.06 per unit of volatility. If you would invest 6,970 in Bulten AB on August 30, 2024 and sell it today you would lose (200.00) from holding Bulten AB or give up 2.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
New Wave Group vs. Bulten AB
Performance |
| Timeline |
| New Wave Group |
| Bulten AB |
New Wave and Bulten AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Wave and Bulten AB
The main advantage of trading using opposite New Wave and Bulten AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Wave position performs unexpectedly, Bulten 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 Bulten AB will offset losses from the drop in Bulten AB's long position.| New Wave vs. Telefonaktiebolaget LM Ericsson | New Wave vs. Swedbank AB | New Wave vs. AB Electrolux | New Wave vs. Investor AB ser |
| Bulten AB vs. Inwido AB | Bulten AB vs. Clas Ohlson AB | Bulten AB vs. Bufab Holding AB | Bulten AB vs. Byggmax Group AB |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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