Correlation Between Kobay Tech and Nova Wellness

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

By analyzing existing cross correlation between Kobay Tech Bhd and Nova Wellness Group, you can compare the effects of market volatilities on Kobay Tech and Nova Wellness 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 Kobay Tech with a short position of Nova Wellness. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kobay Tech and Nova Wellness.

Diversification Opportunities for Kobay Tech and Nova Wellness

-0.31

Correlation Coefficient

Kobay Tech  Nova Wellness

Very good diversification

The 3 months correlation between Kobay and Nova is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Kobay Tech Bhd and Nova Wellness Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Wellness Group and Kobay Tech 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 Kobay Tech Bhd are associated (or correlated) with Nova Wellness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Wellness Group has no effect on the direction of Kobay Tech i.e., Kobay Tech and Nova Wellness go up and down completely randomly.

Pair Corralation between Kobay Tech and Nova Wellness

Assuming the 90 days trading horizon Kobay Tech Bhd is expected to under-perform the Nova Wellness. In addition to that, Kobay Tech is 1.79 times more volatile than Nova Wellness Group. It trades about -0.05 of its total potential returns per unit of risk. Nova Wellness Group is currently generating about -0.05 per unit of volatility. If you would invest  52.00  in Nova Wellness Group on September 26, 2024 and sell it today you would lose (8.00) from holding Nova Wellness Group or give up 15.38% of portfolio value over 90 days.

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

Kobay Tech Bhd  vs.  Nova Wellness Group

Kobay Tech Bhd

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kobay Tech Bhd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Kobay Tech is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Nova Wellness Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nova Wellness Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Nova Wellness is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Kobay Tech and Nova Wellness

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

The idea behind Kobay Tech Bhd and Nova Wellness Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.