Correlation Between Innometry and NOVAREX CoLtd

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

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

Diversification Opportunities for Innometry and NOVAREX CoLtd

0.77

Correlation Coefficient

Innometry  NOVAREX CoLtd

Poor diversification

The 3 months correlation between Innometry and NOVAREX is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Innometry Co and NOVAREX CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVAREX CoLtd and Innometry 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 Innometry Co 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 Innometry i.e., Innometry and NOVAREX CoLtd go up and down completely randomly.

Pair Corralation between Innometry and NOVAREX CoLtd

Assuming the 90 days trading horizon Innometry Co is expected to under-perform the NOVAREX CoLtd. But the stock apears to be less risky and, when comparing its historical volatility, Innometry Co is 1.33 times less risky than NOVAREX CoLtd. The stock trades about -0.22 of its potential returns per unit of risk. The NOVAREX CoLtd is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  966,000  in NOVAREX CoLtd on September 15, 2024 and sell it today you would lose (228,000) from holding NOVAREX CoLtd or give up 23.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Innometry Co  vs.  NOVAREX CoLtd

Innometry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innometry 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 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 Innometry and NOVAREX CoLtd

The main advantage of trading using opposite Innometry and NOVAREX CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innometry 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 Innometry Co 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.