Correlation Between Navamedic ASA and PCI Biotech

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

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

Diversification Opportunities for Navamedic ASA and PCI Biotech

0.6

Correlation Coefficient

Navamedic ASA  PCI Biotech

Poor diversification

The 3 months correlation between Navamedic and PCI is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Navamedic ASA 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 Navamedic ASA 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 Navamedic ASA 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 Navamedic ASA i.e., Navamedic ASA and PCI Biotech go up and down completely randomly.

Pair Corralation between Navamedic ASA and PCI Biotech

Assuming the 90 days trading horizon Navamedic ASA is expected to generate 0.48 times more return on investment than PCI Biotech. However, Navamedic ASA is 2.1 times less risky than PCI Biotech. It trades about -0.03 of its potential returns per unit of risk. PCI Biotech Holding is currently generating about -0.03 per unit of risk. If you would invest  2,830  in Navamedic ASA on September 4, 2024 and sell it today you would lose (260.00) from holding Navamedic ASA or give up 9.19% of portfolio value over 90 days.

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

Navamedic ASA  vs.  PCI Biotech Holding

Navamedic ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Navamedic ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Navamedic ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the 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 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.

Pair Trading with Navamedic ASA and PCI Biotech

The main advantage of trading using opposite Navamedic ASA and PCI Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Navamedic ASA 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 Navamedic ASA 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.