Correlation Between Newcap Holding and Strategic Investments

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

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

Diversification Opportunities for Newcap Holding and Strategic Investments

0.3

Correlation Coefficient

Newcap Holding  Strategic Investments

Weak diversification

The 3 months correlation between Newcap and Strategic is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Newcap Holding AS and Strategic Investments AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Investments and Newcap Holding 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 Newcap Holding AS are associated (or correlated) with Strategic Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Investments has no effect on the direction of Newcap Holding i.e., Newcap Holding and Strategic Investments go up and down completely randomly.

Pair Corralation between Newcap Holding and Strategic Investments

Assuming the 90 days trading horizon Newcap Holding AS is expected to generate 8.17 times more return on investment than Strategic Investments. However, Newcap Holding is 8.17 times more volatile than Strategic Investments AS. It trades about 0.05 of its potential returns per unit of risk. Strategic Investments AS is currently generating about 0.02 per unit of risk. If you would invest  18.00  in Newcap Holding AS on August 31, 2024 and sell it today you would lose (8.80) from holding Newcap Holding AS or give up 48.89% of portfolio value over 90 days.

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

Newcap Holding AS  vs.  Strategic Investments AS

Newcap Holding AS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Newcap Holding AS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Newcap Holding sustained solid returns over the last few months and may actually be approaching a breakup point.

Strategic Investments

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Investments AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Strategic Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Newcap Holding and Strategic Investments

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

The idea behind Newcap Holding AS and Strategic Investments AS 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.