Correlation Between Asseco Business and Novita SA

Can any of the company-specific risk be diversified away by investing in both Asseco Business and Novita SA 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 Asseco Business and Novita SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Asseco Business Solutions and Novita SA, you can compare the effects of market volatilities on Asseco Business and Novita SA 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 Asseco Business with a short position of Novita SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asseco Business and Novita SA.

Diversification Opportunities for Asseco Business and Novita SA

-0.45

Correlation Coefficient

Asseco Business  Novita SA

Very good diversification

The 3 months correlation between Asseco and Novita is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Asseco Business Solutions and Novita SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novita SA and Asseco Business 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 Asseco Business Solutions are associated (or correlated) with Novita SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novita SA has no effect on the direction of Asseco Business i.e., Asseco Business and Novita SA go up and down completely randomly.

Pair Corralation between Asseco Business and Novita SA

Assuming the 90 days trading horizon Asseco Business is expected to generate 1.09 times less return on investment than Novita SA. But when comparing it to its historical volatility, Asseco Business Solutions is 2.07 times less risky than Novita SA. It trades about 0.09 of its potential returns per unit of risk. Novita SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,290  in Novita SA on September 12, 2024 and sell it today you would earn a total of  5,210  from holding Novita SA or generate 71.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Asseco Business Solutions  vs.  Novita SA

Asseco Business Solutions

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Asseco Business Solutions are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Asseco Business is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Novita SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Novita SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Novita SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asseco Business and Novita SA

The main advantage of trading using opposite Asseco Business and Novita SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asseco Business position performs unexpectedly, Novita SA 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 Novita SA will offset losses from the drop in Novita SA's long position.

The idea behind Asseco Business Solutions and Novita SA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.