Correlation Between Clal Biotechnology and Nova

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

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

Diversification Opportunities for Clal Biotechnology and Nova

-0.3

Correlation Coefficient

Clal Biotechnology  Nova

Very good diversification

The 3 months correlation between Clal and Nova is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Clal Biotechnology Industries and Nova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova and Clal Biotechnology 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 Clal Biotechnology Industries are associated (or correlated) with Nova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova has no effect on the direction of Clal Biotechnology i.e., Clal Biotechnology and Nova go up and down completely randomly.

Pair Corralation between Clal Biotechnology and Nova

Assuming the 90 days trading horizon Clal Biotechnology is expected to generate 4.69 times less return on investment than Nova. But when comparing it to its historical volatility, Clal Biotechnology Industries is 3.31 times less risky than Nova. It trades about 0.13 of its potential returns per unit of risk. Nova is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  8,010,000  in Nova on November 28, 2024 and sell it today you would earn a total of  971,000  from holding Nova or generate 12.12% return on investment over 90 days.

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

Clal Biotechnology Industries  vs.  Nova

Clal Biotechnology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clal Biotechnology Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Clal Biotechnology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nova

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nova are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nova sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clal Biotechnology and Nova

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

The idea behind Clal Biotechnology Industries and Nova 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.