Correlation Between New Wave and Duni AB
Can any of the company-specific risk be diversified away by investing in both New Wave and Duni 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 Duni 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 Duni AB, you can compare the effects of market volatilities on New Wave and Duni 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 Duni AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Wave and Duni AB.
Diversification Opportunities for New Wave and Duni AB
Poor diversification
The 3 months correlation between New and Duni is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding New Wave Group and Duni AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duni 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 Duni AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duni AB has no effect on the direction of New Wave i.e., New Wave and Duni AB go up and down completely randomly.
Pair Corralation between New Wave and Duni AB
Assuming the 90 days trading horizon New Wave Group is expected to generate 1.57 times more return on investment than Duni AB. However, New Wave is 1.57 times more volatile than Duni AB. It trades about 0.02 of its potential returns per unit of risk. Duni AB is currently generating about 0.0 per unit of risk. If you would invest 8,871 in New Wave Group on August 31, 2024 and sell it today you would earn a total of 804.00 from holding New Wave Group or generate 9.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Wave Group vs. Duni AB
Performance |
| Timeline |
| New Wave Group |
| Duni AB |
New Wave and Duni AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Wave and Duni AB
The main advantage of trading using opposite New Wave and Duni AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Wave position performs unexpectedly, Duni 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 Duni AB will offset losses from the drop in Duni AB's long position.The idea behind New Wave Group and Duni 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.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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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