Correlation Between Karmarts Public and Nova Organic

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

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

Diversification Opportunities for Karmarts Public and Nova Organic

0.62

Correlation Coefficient

Karmarts Public  Nova Organic

Poor diversification

The 3 months correlation between Karmarts and Nova is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Karmarts Public 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 Karmarts Public 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 Karmarts Public 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 Karmarts Public i.e., Karmarts Public and Nova Organic go up and down completely randomly.

Pair Corralation between Karmarts Public and Nova Organic

Assuming the 90 days trading horizon Karmarts Public is expected to under-perform the Nova Organic. But the stock apears to be less risky and, when comparing its historical volatility, Karmarts Public is 1.66 times less risky than Nova Organic. The stock trades about -0.12 of its potential returns per unit of risk. The Nova Organic PCL is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  83.00  in Nova Organic PCL on December 30, 2024 and sell it today you would lose (11.00) from holding Nova Organic PCL or give up 13.25% of portfolio value over 90 days.

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

Karmarts Public  vs.  Nova Organic PCL

Karmarts Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Karmarts Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nova Organic PCL

Risk-Adjusted Performance

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 Karmarts Public and Nova Organic

The main advantage of trading using opposite Karmarts Public and Nova Organic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Karmarts Public 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 Karmarts Public 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.