Correlation Between Episurf Medical and Novotek AB

Can any of the company-specific risk be diversified away by investing in both Episurf Medical and Novotek AB 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 Episurf Medical and Novotek AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Episurf Medical and Novotek AB

0.37

Correlation Coefficient

Episurf Medical  Novotek AB

Weak diversification

The 3 months correlation between Episurf and Novotek is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Episurf Medical AB and Novotek AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novotek AB and Episurf Medical 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 Episurf Medical AB are associated (or correlated) with Novotek AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novotek AB has no effect on the direction of Episurf Medical i.e., Episurf Medical and Novotek AB go up and down completely randomly.

Pair Corralation between Episurf Medical and Novotek AB

Assuming the 90 days trading horizon Episurf Medical AB is expected to under-perform the Novotek AB. In addition to that, Episurf Medical is 2.32 times more volatile than Novotek AB. It trades about -0.09 of its total potential returns per unit of risk. Novotek AB is currently generating about 0.09 per unit of volatility. If you would invest  6,060  in Novotek AB on September 12, 2024 and sell it today you would earn a total of  680.00  from holding Novotek AB or generate 11.22% return on investment over 90 days.

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

Episurf Medical AB  vs.  Novotek AB

Episurf Medical AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Episurf Medical AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Novotek AB

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Novotek AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Novotek AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Episurf Medical and Novotek AB

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

The idea behind Episurf Medical AB and Novotek AB 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.