Correlation Between Alan Allman and Novatech Industries

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

By analyzing existing cross correlation between Alan Allman Associates and Novatech Industries SA, you can compare the effects of market volatilities on Alan Allman and Novatech Industries 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 Alan Allman with a short position of Novatech Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alan Allman and Novatech Industries.

Diversification Opportunities for Alan Allman and Novatech Industries

0.0

Correlation Coefficient

Alan Allman  Novatech Industries

Pay attention - limited upside

The 3 months correlation between Alan and Novatech is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alan Allman Associates and Novatech Industries SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatech Industries and Alan Allman 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 Alan Allman Associates are associated (or correlated) with Novatech Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novatech Industries has no effect on the direction of Alan Allman i.e., Alan Allman and Novatech Industries go up and down completely randomly.

Pair Corralation between Alan Allman and Novatech Industries

Assuming the 90 days trading horizon Alan Allman is expected to generate 111.47 times less return on investment than Novatech Industries. But when comparing it to its historical volatility, Alan Allman Associates is 1.88 times less risky than Novatech Industries. It trades about 0.0 of its potential returns per unit of risk. Novatech Industries SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  595.00  in Novatech Industries SA on October 9, 2024 and sell it today you would earn a total of  455.00  from holding Novatech Industries SA or generate 76.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	96.61%
Values	Daily Returns

Alan Allman Associates  vs.  Novatech Industries SA

Alan Allman Associates

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alan Allman Associates are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Alan Allman sustained solid returns over the last few months and may actually be approaching a breakup point.

Novatech Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novatech Industries SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Novatech Industries is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Alan Allman and Novatech Industries

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

The idea behind Alan Allman Associates and Novatech Industries SA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.