Correlation Between UNISEM and NOVAREX CoLtd

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

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

Diversification Opportunities for UNISEM and NOVAREX CoLtd

0.79

Correlation Coefficient

UNISEM  NOVAREX CoLtd

Poor diversification

The 3 months correlation between UNISEM and NOVAREX is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding UNISEM Co and NOVAREX CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVAREX CoLtd and UNISEM 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 UNISEM Co are associated (or correlated) with NOVAREX CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOVAREX CoLtd has no effect on the direction of UNISEM i.e., UNISEM and NOVAREX CoLtd go up and down completely randomly.

Pair Corralation between UNISEM and NOVAREX CoLtd

Assuming the 90 days trading horizon UNISEM Co is expected to generate 0.96 times more return on investment than NOVAREX CoLtd. However, UNISEM Co is 1.04 times less risky than NOVAREX CoLtd. It trades about 0.0 of its potential returns per unit of risk. NOVAREX CoLtd is currently generating about -0.11 per unit of risk. If you would invest  620,000  in UNISEM Co on September 16, 2024 and sell it today you would lose (26,000) from holding UNISEM Co or give up 4.19% of portfolio value over 90 days.

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

UNISEM Co  vs.  NOVAREX CoLtd

UNISEM

Risk-Adjusted Performance

0 of 100

Very Weak

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

NOVAREX CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NOVAREX CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with UNISEM and NOVAREX CoLtd

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

The idea behind UNISEM Co and NOVAREX CoLtd 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.