Correlation Between Napatech and PCI Biotech

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

By analyzing existing cross correlation between Napatech AS and PCI Biotech Holding, you can compare the effects of market volatilities on Napatech and PCI Biotech 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 Napatech with a short position of PCI Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Napatech and PCI Biotech.

Diversification Opportunities for Napatech and PCI Biotech

0.73

Correlation Coefficient

Napatech  PCI Biotech

Poor diversification

The 3 months correlation between Napatech and PCI is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Napatech AS and PCI Biotech Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCI Biotech Holding and Napatech 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 Napatech AS are associated (or correlated) with PCI Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCI Biotech Holding has no effect on the direction of Napatech i.e., Napatech and PCI Biotech go up and down completely randomly.

Pair Corralation between Napatech and PCI Biotech

Assuming the 90 days trading horizon Napatech AS is expected to under-perform the PCI Biotech. But the stock apears to be less risky and, when comparing its historical volatility, Napatech AS is 2.56 times less risky than PCI Biotech. The stock trades about -0.19 of its potential returns per unit of risk. The PCI Biotech Holding is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  185.00  in PCI Biotech Holding on September 5, 2024 and sell it today you would lose (36.00) from holding PCI Biotech Holding or give up 19.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Napatech AS  vs.  PCI Biotech Holding

Napatech AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Napatech AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

PCI Biotech Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PCI Biotech Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Napatech and PCI Biotech

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

The idea behind Napatech AS and PCI Biotech Holding 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .