Correlation Between NOVATECH and Amogreentech CoLtd

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

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

Diversification Opportunities for NOVATECH and Amogreentech CoLtd

0.34

Correlation Coefficient

NOVATECH  Amogreentech CoLtd

Weak diversification

The 3 months correlation between NOVATECH and Amogreentech is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding NOVATECH Co and Amogreentech CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amogreentech CoLtd 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 Amogreentech CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amogreentech CoLtd has no effect on the direction of NOVATECH i.e., NOVATECH and Amogreentech CoLtd go up and down completely randomly.

Pair Corralation between NOVATECH and Amogreentech CoLtd

Assuming the 90 days trading horizon NOVATECH Co is expected to generate 1.68 times more return on investment than Amogreentech CoLtd. However, NOVATECH is 1.68 times more volatile than Amogreentech CoLtd. It trades about 0.09 of its potential returns per unit of risk. Amogreentech CoLtd is currently generating about 0.01 per unit of risk. If you would invest  1,466,000  in NOVATECH Co on December 28, 2024 and sell it today you would earn a total of  309,000  from holding NOVATECH Co or generate 21.08% return on investment over 90 days.

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

NOVATECH Co  vs.  Amogreentech CoLtd

NOVATECH

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NOVATECH Co are ranked lower than 7 (%) 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.

Amogreentech CoLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amogreentech CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Amogreentech CoLtd is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NOVATECH and Amogreentech CoLtd

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

The idea behind NOVATECH Co and Amogreentech 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.