Correlation Between Nova Technology and Chumpower Machinery

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

By analyzing existing cross correlation between Nova Technology and Chumpower Machinery Corp, you can compare the effects of market volatilities on Nova Technology and Chumpower Machinery 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 Chumpower Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Technology and Chumpower Machinery.

Diversification Opportunities for Nova Technology and Chumpower Machinery

-0.75

Correlation Coefficient

Nova Technology  Chumpower Machinery

Pay attention - limited upside

The 3 months correlation between Nova and Chumpower is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nova Technology and Chumpower Machinery Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chumpower Machinery Corp 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 Chumpower Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chumpower Machinery Corp has no effect on the direction of Nova Technology i.e., Nova Technology and Chumpower Machinery go up and down completely randomly.

Pair Corralation between Nova Technology and Chumpower Machinery

Assuming the 90 days trading horizon Nova Technology is expected to generate 1.01 times more return on investment than Chumpower Machinery. However, Nova Technology is 1.01 times more volatile than Chumpower Machinery Corp. It trades about 0.15 of its potential returns per unit of risk. Chumpower Machinery Corp is currently generating about -0.05 per unit of risk. If you would invest  16,250  in Nova Technology on September 17, 2024 and sell it today you would earn a total of  2,650  from holding Nova Technology or generate 16.31% return on investment over 90 days.

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

Nova Technology  vs.  Chumpower Machinery Corp

Nova Technology

Risk-Adjusted Performance

11 of 100

Good

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

Chumpower Machinery Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chumpower Machinery Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chumpower Machinery is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Nova Technology and Chumpower Machinery

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

The idea behind Nova Technology and Chumpower Machinery Corp 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 Anywhere module to track or share privately all of your investments from the convenience of any device.