Correlation Between NOVAREX CoLtd and Shinhan WTI

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

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

Diversification Opportunities for NOVAREX CoLtd and Shinhan WTI

0.26

Correlation Coefficient

NOVAREX CoLtd  Shinhan WTI

Modest diversification

The 3 months correlation between NOVAREX and Shinhan is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NOVAREX CoLtd and Shinhan WTI Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan WTI Futures 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 Shinhan WTI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan WTI Futures has no effect on the direction of NOVAREX CoLtd i.e., NOVAREX CoLtd and Shinhan WTI go up and down completely randomly.

Pair Corralation between NOVAREX CoLtd and Shinhan WTI

Assuming the 90 days trading horizon NOVAREX CoLtd is expected to under-perform the Shinhan WTI. In addition to that, NOVAREX CoLtd is 1.94 times more volatile than Shinhan WTI Futures. It trades about -0.11 of its total potential returns per unit of risk. Shinhan WTI Futures is currently generating about 0.02 per unit of volatility. If you would invest  720,000  in Shinhan WTI Futures on September 16, 2024 and sell it today you would earn a total of  12,000  from holding Shinhan WTI Futures or generate 1.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

NOVAREX CoLtd  vs.  Shinhan WTI Futures

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.

Shinhan WTI Futures

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan WTI Futures are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shinhan WTI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NOVAREX CoLtd and Shinhan WTI

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

The idea behind NOVAREX CoLtd and Shinhan WTI Futures 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.