Correlation Between Nova Wellness and Mycron Steel

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

Diversification Opportunities for Nova Wellness and Mycron Steel

0.26

Correlation Coefficient

Nova Wellness  Mycron Steel

Modest diversification

The 3 months correlation between Nova and Mycron is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nova Wellness Group and Mycron Steel Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mycron Steel 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 Mycron Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mycron Steel Bhd has no effect on the direction of Nova Wellness i.e., Nova Wellness and Mycron Steel go up and down completely randomly.

Pair Corralation between Nova Wellness and Mycron Steel

Assuming the 90 days trading horizon Nova Wellness Group is expected to generate 0.71 times more return on investment than Mycron Steel. However, Nova Wellness Group is 1.41 times less risky than Mycron Steel. It trades about -0.01 of its potential returns per unit of risk. Mycron Steel Bhd is currently generating about -0.03 per unit of risk. If you would invest  44.00  in Nova Wellness Group on October 11, 2024 and sell it today you would lose (1.00) from holding Nova Wellness Group or give up 2.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Nova Wellness Group  vs.  Mycron Steel 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 quite persistent basic indicators, Nova Wellness is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Mycron Steel Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mycron Steel Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Mycron Steel is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Nova Wellness and Mycron Steel

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

The idea behind Nova Wellness Group and Mycron Steel 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.