Correlation Between A1 and Novation Hldgs

Can any of the company-specific risk be diversified away by investing in both A1 and Novation Hldgs 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 A1 and Novation Hldgs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between A1 Group and Novation Hldgs, you can compare the effects of market volatilities on A1 and Novation Hldgs 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 A1 with a short position of Novation Hldgs. Check out your portfolio center. Please also check ongoing floating volatility patterns of A1 and Novation Hldgs.

Diversification Opportunities for A1 and Novation Hldgs

0.0

Correlation Coefficient

A1  Novation Hldgs

Pay attention - limited upside

The 3 months correlation between A1 and Novation is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding A1 Group and Novation Hldgs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novation Hldgs and A1 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 A1 Group are associated (or correlated) with Novation Hldgs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novation Hldgs has no effect on the direction of A1 i.e., A1 and Novation Hldgs go up and down completely randomly.

Pair Corralation between A1 and Novation Hldgs

If you would invest  0.20  in A1 Group on September 18, 2024 and sell it today you would earn a total of  0.04  from holding A1 Group or generate 20.0% return on investment over 90 days.

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

A1 Group  vs.  Novation Hldgs

A1 Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days A1 Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Novation Hldgs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novation Hldgs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Novation Hldgs is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with A1 and Novation Hldgs

The main advantage of trading using opposite A1 and Novation Hldgs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if A1 position performs unexpectedly, Novation Hldgs 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 Novation Hldgs will offset losses from the drop in Novation Hldgs' long position.

The idea behind A1 Group and Novation Hldgs 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.