Correlation Between Novacyt and DBT SA

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

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

Diversification Opportunities for Novacyt and DBT SA

-0.47

Correlation Coefficient

Novacyt  DBT SA

Very good diversification

The 3 months correlation between Novacyt and DBT is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Novacyt and DBT SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBT SA and Novacyt 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 Novacyt are associated (or correlated) with DBT SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBT SA has no effect on the direction of Novacyt i.e., Novacyt and DBT SA go up and down completely randomly.

Pair Corralation between Novacyt and DBT SA

Assuming the 90 days trading horizon Novacyt is expected to generate 1.5 times more return on investment than DBT SA. However, Novacyt is 1.5 times more volatile than DBT SA. It trades about 0.05 of its potential returns per unit of risk. DBT SA is currently generating about -0.03 per unit of risk. If you would invest  55.00  in Novacyt on December 1, 2024 and sell it today you would earn a total of  5.00  from holding Novacyt or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Novacyt  vs.  DBT SA

Novacyt

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Novacyt are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Novacyt reported solid returns over the last few months and may actually be approaching a breakup point.

DBT SA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Novacyt and DBT SA

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

The idea behind Novacyt and DBT 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.