Correlation Between Novatech Industries and Air France

Can any of the company-specific risk be diversified away by investing in both Novatech Industries and Air France 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 Air France 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 Air France KLM SA, you can compare the effects of market volatilities on Novatech Industries and Air France 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 Air France. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatech Industries and Air France.

Diversification Opportunities for Novatech Industries and Air France

-0.46

Correlation Coefficient

Novatech Industries  Air France

Very good diversification

The 3 months correlation between Novatech and Air is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Novatech Industries SA and Air France KLM SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air France KLM 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 Air France. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air France KLM has no effect on the direction of Novatech Industries i.e., Novatech Industries and Air France go up and down completely randomly.

Pair Corralation between Novatech Industries and Air France

If you would invest  771.00  in Air France KLM SA on October 11, 2024 and sell it today you would lose (3.00) from holding Air France KLM SA or give up 0.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Novatech Industries SA  vs.  Air France KLM SA

Novatech Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novatech Industries SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Novatech Industries is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Air France KLM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air France KLM SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Novatech Industries and Air France

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

The idea behind Novatech Industries SA and Air France KLM SA 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.