Correlation Between InTest and Nova

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

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

Diversification Opportunities for InTest and Nova

0.37

Correlation Coefficient

InTest  Nova

Weak diversification

The 3 months correlation between InTest and Nova is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding inTest and Nova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova and InTest 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 inTest are associated (or correlated) with Nova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova has no effect on the direction of InTest i.e., InTest and Nova go up and down completely randomly.

Pair Corralation between InTest and Nova

Given the investment horizon of 90 days inTest is expected to under-perform the Nova. But the stock apears to be less risky and, when comparing its historical volatility, inTest is 1.15 times less risky than Nova. The stock trades about -0.05 of its potential returns per unit of risk. The Nova is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  19,718  in Nova on December 28, 2024 and sell it today you would lose (435.00) from holding Nova or give up 2.21% of portfolio value over 90 days.

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

inTest  vs.  Nova

inTest

Risk-Adjusted Performance

Very Weak

Over the last 90 days inTest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Nova

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nova has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Nova is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with InTest and Nova

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

The idea behind inTest and Nova 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.