Correlation Between Phoenix Materials and NOVATECH

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

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

Diversification Opportunities for Phoenix Materials and NOVATECH

-0.15

Correlation Coefficient

Phoenix Materials  NOVATECH

Good diversification

The 3 months correlation between Phoenix and NOVATECH is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Phoenix Materials Co and NOVATECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVATECH and Phoenix Materials 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 Phoenix Materials Co 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 Phoenix Materials i.e., Phoenix Materials and NOVATECH go up and down completely randomly.

Pair Corralation between Phoenix Materials and NOVATECH

Assuming the 90 days trading horizon Phoenix Materials Co is expected to generate 1.41 times more return on investment than NOVATECH. However, Phoenix Materials is 1.41 times more volatile than NOVATECH Co. It trades about -0.03 of its potential returns per unit of risk. NOVATECH Co is currently generating about -0.06 per unit of risk. If you would invest  139,100  in Phoenix Materials Co on October 4, 2024 and sell it today you would lose (69,800) from holding Phoenix Materials Co or give up 50.18% of portfolio value over 90 days.

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

Phoenix Materials Co  vs.  NOVATECH Co

Phoenix Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phoenix Materials Co 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NOVATECH

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NOVATECH Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NOVATECH sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phoenix Materials and NOVATECH

The main advantage of trading using opposite Phoenix Materials and NOVATECH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phoenix Materials 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 Phoenix Materials Co 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.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.