Correlation Between Bilendi and Novatech Industries

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

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

Diversification Opportunities for Bilendi and Novatech Industries

-0.05

Correlation Coefficient

Bilendi  Novatech Industries

Good diversification

The 3 months correlation between Bilendi and Novatech is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bilendi and Novatech Industries SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatech Industries and Bilendi 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 Bilendi 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 Bilendi i.e., Bilendi and Novatech Industries go up and down completely randomly.

Pair Corralation between Bilendi and Novatech Industries

Assuming the 90 days trading horizon Bilendi is expected to generate 1.13 times less return on investment than Novatech Industries. But when comparing it to its historical volatility, Bilendi is 2.35 times less risky than Novatech Industries. It trades about 0.06 of its potential returns per unit of risk. Novatech Industries SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,000.00  in Novatech Industries SA on October 5, 2024 and sell it today you would earn a total of  50.00  from holding Novatech Industries SA or generate 5.0% return on investment over 90 days.

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

Bilendi  vs.  Novatech Industries SA

Bilendi

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bilendi are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Bilendi reported 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 Bilendi and Novatech Industries

The main advantage of trading using opposite Bilendi and Novatech Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bilendi 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 Bilendi 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.