Correlation Between Handok Clean and NOVAREX CoLtd

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

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

Diversification Opportunities for Handok Clean and NOVAREX CoLtd

0.89

Correlation Coefficient

Handok Clean  NOVAREX CoLtd

Very poor diversification

The 3 months correlation between Handok and NOVAREX is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Handok Clean Tech and NOVAREX CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVAREX CoLtd and Handok Clean 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 Handok Clean Tech 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 Handok Clean i.e., Handok Clean and NOVAREX CoLtd go up and down completely randomly.

Pair Corralation between Handok Clean and NOVAREX CoLtd

Assuming the 90 days trading horizon Handok Clean Tech is expected to generate 0.4 times more return on investment than NOVAREX CoLtd. However, Handok Clean Tech is 2.51 times less risky than NOVAREX CoLtd. It trades about -0.15 of its potential returns per unit of risk. NOVAREX CoLtd is currently generating about -0.11 per unit of risk. If you would invest  690,000  in Handok Clean Tech on September 17, 2024 and sell it today you would lose (88,000) from holding Handok Clean Tech or give up 12.75% of portfolio value over 90 days.

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

Handok Clean Tech  vs.  NOVAREX CoLtd

Handok Clean Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Handok Clean Tech 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.

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 Handok Clean and NOVAREX CoLtd

The main advantage of trading using opposite Handok Clean and NOVAREX CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Handok Clean 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 Handok Clean Tech 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.