Correlation Between Photocure and Napatech

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

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

Diversification Opportunities for Photocure and Napatech

0.05

Correlation Coefficient

Photocure  Napatech

Significant diversification

The 3 months correlation between Photocure and Napatech is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Photocure and Napatech AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Napatech AS and Photocure 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 Photocure are associated (or correlated) with Napatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Napatech AS has no effect on the direction of Photocure i.e., Photocure and Napatech go up and down completely randomly.

Pair Corralation between Photocure and Napatech

Assuming the 90 days trading horizon Photocure is expected to generate 0.77 times more return on investment than Napatech. However, Photocure is 1.31 times less risky than Napatech. It trades about 0.07 of its potential returns per unit of risk. Napatech AS is currently generating about -0.2 per unit of risk. If you would invest  5,340  in Photocure on September 14, 2024 and sell it today you would earn a total of  410.00  from holding Photocure or generate 7.68% return on investment over 90 days.

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

Photocure  vs.  Napatech AS

Photocure

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Photocure are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Photocure may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Photocure and Napatech

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

The idea behind Photocure and Napatech 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.

Check out your portfolio center.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.