Correlation Between Nova Eye and Aroa Biosurgery

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

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

Diversification Opportunities for Nova Eye and Aroa Biosurgery

0.86

Correlation Coefficient

Nova Eye  Aroa Biosurgery

Very poor diversification

The 3 months correlation between Nova and Aroa is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Nova Eye Medical and Aroa Biosurgery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aroa Biosurgery and Nova Eye 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 Nova Eye Medical are associated (or correlated) with Aroa Biosurgery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aroa Biosurgery has no effect on the direction of Nova Eye i.e., Nova Eye and Aroa Biosurgery go up and down completely randomly.

Pair Corralation between Nova Eye and Aroa Biosurgery

Assuming the 90 days trading horizon Nova Eye Medical is expected to generate 1.13 times more return on investment than Aroa Biosurgery. However, Nova Eye is 1.13 times more volatile than Aroa Biosurgery. It trades about -0.06 of its potential returns per unit of risk. Aroa Biosurgery is currently generating about -0.11 per unit of risk. If you would invest  14.00  in Nova Eye Medical on December 20, 2024 and sell it today you would lose (3.00) from holding Nova Eye Medical or give up 21.43% of portfolio value over 90 days.

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

Nova Eye Medical  vs.  Aroa Biosurgery

Nova Eye Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nova Eye Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Aroa Biosurgery

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aroa Biosurgery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Nova Eye and Aroa Biosurgery

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

The idea behind Nova Eye Medical and Aroa Biosurgery 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.