Correlation Between Alton Sports and NOVATECH

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

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

Diversification Opportunities for Alton Sports and NOVATECH

-0.28

Correlation Coefficient

Alton Sports  NOVATECH

Very good diversification

The 3 months correlation between Alton and NOVATECH is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Alton Sports CoLtd and NOVATECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVATECH and Alton Sports 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 Alton Sports CoLtd 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 Alton Sports i.e., Alton Sports and NOVATECH go up and down completely randomly.

Pair Corralation between Alton Sports and NOVATECH

Assuming the 90 days trading horizon Alton Sports CoLtd is expected to under-perform the NOVATECH. But the stock apears to be less risky and, when comparing its historical volatility, Alton Sports CoLtd is 1.41 times less risky than NOVATECH. The stock trades about -0.11 of its potential returns per unit of risk. The NOVATECH Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  3,435,194  in NOVATECH Co on October 4, 2024 and sell it today you would lose (1,969,194) from holding NOVATECH Co or give up 57.32% of portfolio value over 90 days.

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

Alton Sports CoLtd  vs.  NOVATECH Co

Alton Sports CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alton Sports CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains 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 Alton Sports and NOVATECH

The main advantage of trading using opposite Alton Sports and NOVATECH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alton Sports 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 Alton Sports CoLtd 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.