Correlation Between Novotek AB and New Wave

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Can any of the company-specific risk be diversified away by investing in both Novotek AB and New Wave 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 New Wave into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novotek AB and New Wave Group, you can compare the effects of market volatilities on Novotek AB and New Wave 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 New Wave. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novotek AB and New Wave.

Diversification Opportunities for Novotek AB and New Wave

-0.78
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Novotek and New is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Novotek AB and New Wave Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Wave Group 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 New Wave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Wave Group has no effect on the direction of Novotek AB i.e., Novotek AB and New Wave go up and down completely randomly.

Pair Corralation between Novotek AB and New Wave

Assuming the 90 days trading horizon Novotek AB is expected to generate 1.07 times more return on investment than New Wave. However, Novotek AB is 1.07 times more volatile than New Wave Group. It trades about 0.22 of its potential returns per unit of risk. New Wave Group is currently generating about -0.23 per unit of risk. If you would invest  5,900  in Novotek AB on August 31, 2024 and sell it today you would earn a total of  800.00  from holding Novotek AB or generate 13.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Novotek AB  vs.  New Wave Group

 Performance 
       Timeline  
Novotek AB 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Novotek AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Novotek AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
New Wave Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days New Wave Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Novotek AB and New Wave Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Novotek AB and New Wave

The main advantage of trading using opposite Novotek AB and New Wave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novotek AB position performs unexpectedly, New Wave 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 New Wave will offset losses from the drop in New Wave's long position.
The idea behind Novotek AB and New Wave Group 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.
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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