Correlation Between NOVAREX CoLtd and Finebesteel

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

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

Diversification Opportunities for NOVAREX CoLtd and Finebesteel

0.45

Correlation Coefficient

NOVAREX CoLtd  Finebesteel

Very weak diversification

The 3 months correlation between NOVAREX and Finebesteel is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding NOVAREX CoLtd and Finebesteel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finebesteel and NOVAREX CoLtd 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 NOVAREX CoLtd are associated (or correlated) with Finebesteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finebesteel has no effect on the direction of NOVAREX CoLtd i.e., NOVAREX CoLtd and Finebesteel go up and down completely randomly.

Pair Corralation between NOVAREX CoLtd and Finebesteel

Assuming the 90 days trading horizon NOVAREX CoLtd is expected to generate 0.61 times more return on investment than Finebesteel. However, NOVAREX CoLtd is 1.64 times less risky than Finebesteel. It trades about 0.22 of its potential returns per unit of risk. Finebesteel is currently generating about 0.06 per unit of risk. If you would invest  687,298  in NOVAREX CoLtd on December 5, 2024 and sell it today you would earn a total of  154,702  from holding NOVAREX CoLtd or generate 22.51% return on investment over 90 days.

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

NOVAREX CoLtd  vs.  Finebesteel

NOVAREX CoLtd

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NOVAREX CoLtd are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NOVAREX CoLtd sustained solid returns over the last few months and may actually be approaching a breakup point.

Finebesteel

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Finebesteel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Finebesteel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NOVAREX CoLtd and Finebesteel

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

The idea behind NOVAREX CoLtd and Finebesteel 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.