Correlation Between Nova Technology and Globaltek Fabrication

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

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

Diversification Opportunities for Nova Technology and Globaltek Fabrication

-0.74

Correlation Coefficient

Nova Technology  Globaltek Fabrication

Pay attention - limited upside

The 3 months correlation between Nova and Globaltek is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Nova Technology and Globaltek Fabrication Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globaltek Fabrication and Nova Technology 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 Nova Technology are associated (or correlated) with Globaltek Fabrication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globaltek Fabrication has no effect on the direction of Nova Technology i.e., Nova Technology and Globaltek Fabrication go up and down completely randomly.

Pair Corralation between Nova Technology and Globaltek Fabrication

Assuming the 90 days trading horizon Nova Technology is expected to generate 0.71 times more return on investment than Globaltek Fabrication. However, Nova Technology is 1.41 times less risky than Globaltek Fabrication. It trades about 0.13 of its potential returns per unit of risk. Globaltek Fabrication Co is currently generating about -0.12 per unit of risk. If you would invest  16,600  in Nova Technology on September 15, 2024 and sell it today you would earn a total of  2,300  from holding Nova Technology or generate 13.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Nova Technology  vs.  Globaltek Fabrication Co

Nova Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nova Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Globaltek Fabrication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globaltek Fabrication Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Nova Technology and Globaltek Fabrication

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

The idea behind Nova Technology and Globaltek Fabrication 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.