Correlation Between Computer Modelling and Nova Leap

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

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

Diversification Opportunities for Computer Modelling and Nova Leap

0.47

Correlation Coefficient

Computer Modelling  Nova Leap

Very weak diversification

The 3 months correlation between Computer and Nova is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Computer Modelling Group 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 Computer Modelling 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 Computer Modelling Group 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 Computer Modelling i.e., Computer Modelling and Nova Leap go up and down completely randomly.

Pair Corralation between Computer Modelling and Nova Leap

Assuming the 90 days trading horizon Computer Modelling is expected to generate 1.03 times less return on investment than Nova Leap. But when comparing it to its historical volatility, Computer Modelling Group is 2.24 times less risky than Nova Leap. It trades about 0.07 of its potential returns per unit of risk. Nova Leap Health is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Nova Leap Health on September 26, 2024 and sell it today you would earn a total of  3.00  from holding Nova Leap Health or generate 12.0% return on investment over 90 days.

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

Computer Modelling Group  vs.  Nova Leap Health

Computer Modelling

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nova Leap Health

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Leap Health are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Nova Leap showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Computer Modelling and Nova Leap

The main advantage of trading using opposite Computer Modelling and Nova Leap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Computer Modelling 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 Computer Modelling Group 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.