Correlation Between Central Retail and Nova Organic

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

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

Diversification Opportunities for Central Retail and Nova Organic

-0.08

Correlation Coefficient

Central Retail  Nova Organic

Good diversification

The 3 months correlation between Central and Nova is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Central Retail and Nova Organic PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Organic PCL and Central Retail 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 Central Retail are associated (or correlated) with Nova Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Organic PCL has no effect on the direction of Central Retail i.e., Central Retail and Nova Organic go up and down completely randomly.

Pair Corralation between Central Retail and Nova Organic

Assuming the 90 days trading horizon Central Retail is expected to generate 0.66 times more return on investment than Nova Organic. However, Central Retail is 1.52 times less risky than Nova Organic. It trades about 0.12 of its potential returns per unit of risk. Nova Organic PCL is currently generating about -0.06 per unit of risk. If you would invest  2,950  in Central Retail on September 4, 2024 and sell it today you would earn a total of  475.00  from holding Central Retail or generate 16.1% return on investment over 90 days.

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

Central Retail  vs.  Nova Organic PCL

Central Retail

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Central Retail are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Central Retail disclosed solid returns over the last few months and may actually be approaching a breakup point.

Nova Organic PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nova Organic PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Central Retail and Nova Organic

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

The idea behind Central Retail and Nova Organic PCL 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..