Correlation Between NOVATECH and Sempio Foods

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

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

Diversification Opportunities for NOVATECH and Sempio Foods

-0.39

Correlation Coefficient

NOVATECH  Sempio Foods

Very good diversification

The 3 months correlation between NOVATECH and Sempio is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding NOVATECH Co and Sempio Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sempio Foods 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 Sempio Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sempio Foods has no effect on the direction of NOVATECH i.e., NOVATECH and Sempio Foods go up and down completely randomly.

Pair Corralation between NOVATECH and Sempio Foods

Assuming the 90 days trading horizon NOVATECH Co is expected to generate 1.14 times more return on investment than Sempio Foods. However, NOVATECH is 1.14 times more volatile than Sempio Foods Co. It trades about 0.0 of its potential returns per unit of risk. Sempio Foods Co is currently generating about 0.0 per unit of risk. If you would invest  2,195,946  in NOVATECH Co on October 11, 2024 and sell it today you would lose (500,946) from holding NOVATECH Co or give up 22.81% of portfolio value over 90 days.

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

NOVATECH Co  vs.  Sempio Foods Co

NOVATECH

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NOVATECH Co are ranked lower than 8 (%) 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.

Sempio Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sempio Foods Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with NOVATECH and Sempio Foods

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

The idea behind NOVATECH Co and Sempio Foods Co 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.