Correlation Between North Energy and Napatech

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

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

Diversification Opportunities for North Energy and Napatech

0.69

Correlation Coefficient

North Energy  Napatech

Poor diversification

The 3 months correlation between North and Napatech is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding North Energy ASA and Napatech AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Napatech AS and North Energy 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 North Energy ASA 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 North Energy i.e., North Energy and Napatech go up and down completely randomly.

Pair Corralation between North Energy and Napatech

Assuming the 90 days trading horizon North Energy is expected to generate 2.09 times less return on investment than Napatech. But when comparing it to its historical volatility, North Energy ASA is 1.62 times less risky than Napatech. It trades about 0.13 of its potential returns per unit of risk. Napatech AS is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,946  in Napatech AS on April 23, 2025 and sell it today you would earn a total of  609.00  from holding Napatech AS or generate 31.29% return on investment over 90 days.

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

North Energy ASA  vs.  Napatech AS

North Energy ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in North Energy ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, North Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Napatech AS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Napatech AS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Napatech disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with North Energy and Napatech

The main advantage of trading using opposite North Energy and Napatech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North Energy 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 North Energy ASA 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.