Correlation Between Nova Wellness and Alliance Financial

Can any of the company-specific risk be diversified away by investing in both Nova Wellness and Alliance Financial 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 Alliance Financial 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 Alliance Financial Group, you can compare the effects of market volatilities on Nova Wellness and Alliance Financial 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 Alliance Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Wellness and Alliance Financial.

Diversification Opportunities for Nova Wellness and Alliance Financial

-0.34

Correlation Coefficient

Nova Wellness  Alliance Financial

Very good diversification

The 3 months correlation between Nova and Alliance is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Nova Wellness Group and Alliance Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Financial 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 Alliance Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Financial has no effect on the direction of Nova Wellness i.e., Nova Wellness and Alliance Financial go up and down completely randomly.

Pair Corralation between Nova Wellness and Alliance Financial

Assuming the 90 days trading horizon Nova Wellness Group is expected to under-perform the Alliance Financial. In addition to that, Nova Wellness is 2.04 times more volatile than Alliance Financial Group. It trades about -0.23 of its total potential returns per unit of risk. Alliance Financial Group is currently generating about 0.08 per unit of volatility. If you would invest  483.00  in Alliance Financial Group on December 24, 2024 and sell it today you would earn a total of  26.00  from holding Alliance Financial Group or generate 5.38% return on investment over 90 days.

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

Nova Wellness Group  vs.  Alliance Financial Group

Nova Wellness Group

Risk-Adjusted Performance

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 conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Alliance Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Financial Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Alliance Financial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Nova Wellness and Alliance Financial

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

The idea behind Nova Wellness Group and Alliance Financial Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.