Correlation Between Entech SE and Novatech Industries

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

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

Diversification Opportunities for Entech SE and Novatech Industries

-0.15

Correlation Coefficient

Entech SE  Novatech Industries

Good diversification

The 3 months correlation between Entech and Novatech is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Entech SE SAS and Novatech Industries SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatech Industries and Entech SE 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 Entech SE SAS 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 Entech SE i.e., Entech SE and Novatech Industries go up and down completely randomly.

Pair Corralation between Entech SE and Novatech Industries

Assuming the 90 days trading horizon Entech SE SAS is expected to under-perform the Novatech Industries. But the stock apears to be less risky and, when comparing its historical volatility, Entech SE SAS is 1.15 times less risky than Novatech Industries. The stock trades about -0.01 of its potential returns per unit of risk. The Novatech Industries SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  890.00  in Novatech Industries SA on September 15, 2024 and sell it today you would earn a total of  160.00  from holding Novatech Industries SA or generate 17.98% return on investment over 90 days.

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

Entech SE SAS  vs.  Novatech Industries SA

Entech SE SAS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Novatech Industries

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Novatech Industries SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Novatech Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Entech SE and Novatech Industries

The main advantage of trading using opposite Entech SE and Novatech Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entech SE 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 Entech SE SAS 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.