Correlation Between Novotek AB and Micro Systemation
Can any of the company-specific risk be diversified away by investing in both Novotek AB and Micro Systemation 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 Novotek AB and Micro Systemation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novotek AB and Micro Systemation AB, you can compare the effects of market volatilities on Novotek AB and Micro Systemation 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 Novotek AB with a short position of Micro Systemation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novotek AB and Micro Systemation.
Diversification Opportunities for Novotek AB and Micro Systemation
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Novotek and Micro is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Novotek AB and Micro Systemation AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Systemation and Novotek 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 Novotek AB are associated (or correlated) with Micro Systemation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Systemation has no effect on the direction of Novotek AB i.e., Novotek AB and Micro Systemation go up and down completely randomly.
Pair Corralation between Novotek AB and Micro Systemation
Assuming the 90 days trading horizon Novotek AB is expected to generate 1.07 times more return on investment than Micro Systemation. However, Novotek AB is 1.07 times more volatile than Micro Systemation AB. It trades about 0.05 of its potential returns per unit of risk. Micro Systemation AB is currently generating about 0.04 per unit of risk. If you would invest 4,230 in Novotek AB on September 3, 2024 and sell it today you would earn a total of 2,350 from holding Novotek AB or generate 55.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novotek AB vs. Micro Systemation AB
Performance |
| Timeline |
| Novotek AB |
| Micro Systemation |
Novotek AB and Micro Systemation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novotek AB and Micro Systemation
The main advantage of trading using opposite Novotek AB and Micro Systemation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novotek AB position performs unexpectedly, Micro Systemation 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 Micro Systemation will offset losses from the drop in Micro Systemation's long position.| Novotek AB vs. Softronic AB | Novotek AB vs. Prevas AB | Novotek AB vs. FormPipe Software AB | Novotek AB vs. Dedicare AB |
| Micro Systemation vs. Novotek AB | Micro Systemation vs. FormPipe Software AB | Micro Systemation vs. Softronic AB | Micro Systemation vs. Prevas 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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