Correlation Between Canaf Investments and Nova Leap

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

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

Diversification Opportunities for Canaf Investments and Nova Leap

0.39

Correlation Coefficient

Canaf Investments  Nova Leap

Weak diversification

The 3 months correlation between Canaf and Nova is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Canaf Investments and Nova Leap Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Leap Health and Canaf Investments 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 Canaf Investments are associated (or correlated) with Nova Leap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Leap Health has no effect on the direction of Canaf Investments i.e., Canaf Investments and Nova Leap go up and down completely randomly.

Pair Corralation between Canaf Investments and Nova Leap

Assuming the 90 days horizon Canaf Investments is expected to generate 0.7 times more return on investment than Nova Leap. However, Canaf Investments is 1.43 times less risky than Nova Leap. It trades about 0.18 of its potential returns per unit of risk. Nova Leap Health is currently generating about 0.11 per unit of risk. If you would invest  30.00  in Canaf Investments on October 10, 2024 and sell it today you would earn a total of  3.00  from holding Canaf Investments or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Canaf Investments  vs.  Nova Leap Health

Canaf Investments

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canaf Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Canaf Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Nova Leap Health

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Leap Health are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Nova Leap showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canaf Investments and Nova Leap

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

The idea behind Canaf Investments and Nova Leap Health 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.