Correlation Between BE Group and New Wave

Can any of the company-specific risk be diversified away by investing in both BE Group 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 BE Group and New Wave into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BE Group AB and New Wave Group, you can compare the effects of market volatilities on BE Group 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 BE Group with a short position of New Wave. Check out your portfolio center. Please also check ongoing floating volatility patterns of BE Group and New Wave.

Diversification Opportunities for BE Group and New Wave

0.82

Correlation Coefficient

BE Group  New Wave

Very poor diversification

The 3 months correlation between BEGR and New is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding BE Group 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 BE Group 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 BE Group 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 BE Group i.e., BE Group and New Wave go up and down completely randomly.

Pair Corralation between BE Group and New Wave

Assuming the 90 days trading horizon BE Group AB is expected to generate 0.7 times more return on investment than New Wave. However, BE Group AB is 1.43 times less risky than New Wave. It trades about -0.08 of its potential returns per unit of risk. New Wave Group is currently generating about -0.07 per unit of risk. If you would invest  5,030  in BE Group AB on September 3, 2024 and sell it today you would lose (430.00) from holding BE Group AB or give up 8.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

BE Group AB  vs.  New Wave Group

BE Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BE Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

New Wave Group

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with BE Group and New Wave

The main advantage of trading using opposite BE Group and New Wave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BE Group 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 BE Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.