Correlation Between New Wave and Hexatronic Group
Can any of the company-specific risk be diversified away by investing in both New Wave and Hexatronic Group 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 Hexatronic Group 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 Hexatronic Group AB, you can compare the effects of market volatilities on New Wave and Hexatronic Group 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 Hexatronic Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Wave and Hexatronic Group.
Diversification Opportunities for New Wave and Hexatronic Group
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Hexatronic is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding New Wave Group and Hexatronic Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexatronic Group 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 Hexatronic Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexatronic Group has no effect on the direction of New Wave i.e., New Wave and Hexatronic Group go up and down completely randomly.
Pair Corralation between New Wave and Hexatronic Group
Assuming the 90 days trading horizon New Wave Group is expected to generate 0.72 times more return on investment than Hexatronic Group. However, New Wave Group is 1.39 times less risky than Hexatronic Group. It trades about -0.19 of its potential returns per unit of risk. Hexatronic Group AB is currently generating about -0.31 per unit of risk. If you would invest 10,970 in New Wave Group on August 25, 2024 and sell it today you would lose (1,310) from holding New Wave Group or give up 11.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Wave Group vs. Hexatronic Group AB
Performance |
| Timeline |
| New Wave Group |
| Hexatronic Group |
New Wave and Hexatronic Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Wave and Hexatronic Group
The main advantage of trading using opposite New Wave and Hexatronic Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Wave position performs unexpectedly, Hexatronic Group 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 Hexatronic Group will offset losses from the drop in Hexatronic Group's long position.| New Wave vs. Hexatronic Group AB | New Wave vs. Inwido AB | New Wave vs. Lindab International AB | New Wave vs. Byggmax Group AB |
| Hexatronic Group vs. Addtech AB | Hexatronic Group vs. Teqnion AB | Hexatronic Group vs. Vitec Software Group | Hexatronic Group vs. Lagercrantz 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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