Correlation Between Novatech Industries and Alan Allman

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

By analyzing existing cross correlation between Novatech Industries SA and Alan Allman Associates, you can compare the effects of market volatilities on Novatech Industries and Alan Allman 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 Novatech Industries with a short position of Alan Allman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatech Industries and Alan Allman.

Diversification Opportunities for Novatech Industries and Alan Allman

0.1

Correlation Coefficient

Novatech Industries  Alan Allman

Average diversification

The 3 months correlation between Novatech and Alan is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Novatech Industries SA and Alan Allman Associates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alan Allman Associates and Novatech Industries 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 Novatech Industries SA are associated (or correlated) with Alan Allman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alan Allman Associates has no effect on the direction of Novatech Industries i.e., Novatech Industries and Alan Allman go up and down completely randomly.

Pair Corralation between Novatech Industries and Alan Allman

If you would invest  460.00  in Alan Allman Associates on October 21, 2024 and sell it today you would earn a total of  275.00  from holding Alan Allman Associates or generate 59.78% return on investment over 90 days.

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

Novatech Industries SA  vs.  Alan Allman Associates

Novatech Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Novatech Industries SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Novatech Industries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Alan Allman Associates

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alan Allman Associates are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Alan Allman sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novatech Industries and Alan Allman

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

The idea behind Novatech Industries SA and Alan Allman Associates 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.