Correlation Between NOHO and Labor Smart

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

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

Diversification Opportunities for NOHO and Labor Smart

0.28

Correlation Coefficient

NOHO  Labor Smart

Modest diversification

The 3 months correlation between NOHO and Labor is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding NOHO Inc and Labor Smart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labor Smart and NOHO 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 NOHO Inc are associated (or correlated) with Labor Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labor Smart has no effect on the direction of NOHO i.e., NOHO and Labor Smart go up and down completely randomly.

Pair Corralation between NOHO and Labor Smart

Given the investment horizon of 90 days NOHO Inc is expected to generate 2.79 times more return on investment than Labor Smart. However, NOHO is 2.79 times more volatile than Labor Smart. It trades about 0.08 of its potential returns per unit of risk. Labor Smart is currently generating about 0.07 per unit of risk. If you would invest  0.03  in NOHO Inc on September 4, 2024 and sell it today you would lose (0.01) from holding NOHO Inc or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

NOHO Inc  vs.  Labor Smart

NOHO Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NOHO Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, NOHO disclosed solid returns over the last few months and may actually be approaching a breakup point.

Labor Smart

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with NOHO and Labor Smart

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

The idea behind NOHO Inc and Labor Smart 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.