Correlation Between NOVATECH and Mgame Corp

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

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

Diversification Opportunities for NOVATECH and Mgame Corp

-0.67

Correlation Coefficient

NOVATECH  Mgame Corp

Excellent diversification

The 3 months correlation between NOVATECH and Mgame is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding NOVATECH Co and Mgame Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mgame Corp and NOVATECH 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 NOVATECH Co are associated (or correlated) with Mgame Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mgame Corp has no effect on the direction of NOVATECH i.e., NOVATECH and Mgame Corp go up and down completely randomly.

Pair Corralation between NOVATECH and Mgame Corp

Assuming the 90 days trading horizon NOVATECH Co is expected to generate 1.47 times more return on investment than Mgame Corp. However, NOVATECH is 1.47 times more volatile than Mgame Corp. It trades about 0.18 of its potential returns per unit of risk. Mgame Corp is currently generating about -0.06 per unit of risk. If you would invest  1,198,000  in NOVATECH Co on October 26, 2024 and sell it today you would earn a total of  741,000  from holding NOVATECH Co or generate 61.85% return on investment over 90 days.

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

NOVATECH Co  vs.  Mgame Corp

NOVATECH

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NOVATECH Co are ranked lower than 13 (%) 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.

Mgame Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mgame Corp 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.

Pair Trading with NOVATECH and Mgame Corp

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

The idea behind NOVATECH Co and Mgame Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.