Correlation Between Nova Wellness and Sanichi Technology

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

By analyzing existing cross correlation between Nova Wellness Group and Sanichi Technology Bhd, you can compare the effects of market volatilities on Nova Wellness and Sanichi Technology 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 Nova Wellness with a short position of Sanichi Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Wellness and Sanichi Technology.

Diversification Opportunities for Nova Wellness and Sanichi Technology

-0.04

Correlation Coefficient

Nova Wellness  Sanichi Technology

Good diversification

The 3 months correlation between Nova and Sanichi is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Nova Wellness Group and Sanichi Technology Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanichi Technology Bhd and Nova Wellness 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 Nova Wellness Group are associated (or correlated) with Sanichi Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanichi Technology Bhd has no effect on the direction of Nova Wellness i.e., Nova Wellness and Sanichi Technology go up and down completely randomly.

Pair Corralation between Nova Wellness and Sanichi Technology

Assuming the 90 days trading horizon Nova Wellness Group is expected to under-perform the Sanichi Technology. But the stock apears to be less risky and, when comparing its historical volatility, Nova Wellness Group is 93.09 times less risky than Sanichi Technology. The stock trades about -0.06 of its potential returns per unit of risk. The Sanichi Technology Bhd is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Sanichi Technology Bhd on October 22, 2024 and sell it today you would lose (2.00) from holding Sanichi Technology Bhd or give up 13.33% of portfolio value over 90 days.

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

Nova Wellness Group  vs.  Sanichi Technology Bhd

Nova Wellness Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sanichi Technology Bhd

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sanichi Technology Bhd are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Sanichi Technology disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nova Wellness and Sanichi Technology

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

The idea behind Nova Wellness Group and Sanichi Technology Bhd 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.