Correlation Between Fresenius and Nova Leap

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

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

Diversification Opportunities for Fresenius and Nova Leap

-0.18

Correlation Coefficient

Fresenius  Nova Leap

Good diversification

The 3 months correlation between Fresenius and Nova is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius SE Co 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 Fresenius 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 Fresenius SE Co 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 Fresenius i.e., Fresenius and Nova Leap go up and down completely randomly.

Pair Corralation between Fresenius and Nova Leap

Assuming the 90 days horizon Fresenius SE Co is expected to under-perform the Nova Leap. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fresenius SE Co is 5.98 times less risky than Nova Leap. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Nova Leap Health is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Nova Leap Health on September 3, 2024 and sell it today you would earn a total of  1.00  from holding Nova Leap Health or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Fresenius SE Co  vs.  Nova Leap Health

Fresenius SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fresenius SE Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Fresenius is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nova Leap Health

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Leap Health are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Nova Leap reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fresenius and Nova Leap

The main advantage of trading using opposite Fresenius and Nova Leap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresenius 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 Fresenius SE Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.