Correlation Between KTB Investment and NOVATECH

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

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

Diversification Opportunities for KTB Investment and NOVATECH

-0.34

Correlation Coefficient

KTB Investment  NOVATECH

Very good diversification

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

Pair Corralation between KTB Investment and NOVATECH

Assuming the 90 days trading horizon KTB Investment is expected to generate 3.86 times less return on investment than NOVATECH. In addition to that, KTB Investment is 1.02 times more volatile than NOVATECH Co. It trades about 0.01 of its total potential returns per unit of risk. NOVATECH Co is currently generating about 0.04 per unit of volatility. If you would invest  1,382,285  in NOVATECH Co on December 24, 2024 and sell it today you would earn a total of  53,715  from holding NOVATECH Co or generate 3.89% return on investment over 90 days.

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

KTB Investment Securities  vs.  NOVATECH Co

KTB Investment Securities

Risk-Adjusted Performance

Very Weak

Over the last 90 days KTB Investment Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KTB Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NOVATECH

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NOVATECH Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NOVATECH may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with KTB Investment and NOVATECH

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

The idea behind KTB Investment Securities and NOVATECH Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.