Correlation Between NOVATECH and APro

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

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

Diversification Opportunities for NOVATECH and APro

-0.54

Correlation Coefficient

NOVATECH  APro

Excellent diversification

The 3 months correlation between NOVATECH and APro is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding NOVATECH Co and APro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APro 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 APro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APro has no effect on the direction of NOVATECH i.e., NOVATECH and APro go up and down completely randomly.

Pair Corralation between NOVATECH and APro

Assuming the 90 days trading horizon NOVATECH Co is expected to generate 1.56 times more return on investment than APro. However, NOVATECH is 1.56 times more volatile than APro Co. It trades about 0.22 of its potential returns per unit of risk. APro Co is currently generating about 0.19 per unit of risk. If you would invest  1,569,000  in NOVATECH Co on October 22, 2024 and sell it today you would earn a total of  181,000  from holding NOVATECH Co or generate 11.54% return on investment over 90 days.

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

NOVATECH Co  vs.  APro Co

NOVATECH

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NOVATECH Co are ranked lower than 11 (%) 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.

APro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APro Co 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 APro

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

The idea behind NOVATECH Co and APro 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.