Correlation Between Novatech Industries and Bilendi

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

Diversification Opportunities for Novatech Industries and Bilendi

-0.05

Correlation Coefficient

Novatech Industries  Bilendi

Good diversification

The 3 months correlation between Novatech and Bilendi is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Novatech Industries SA and Bilendi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bilendi 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 Bilendi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bilendi has no effect on the direction of Novatech Industries i.e., Novatech Industries and Bilendi go up and down completely randomly.

Pair Corralation between Novatech Industries and Bilendi

Assuming the 90 days trading horizon Novatech Industries SA is expected to generate 2.35 times more return on investment than Bilendi. However, Novatech Industries is 2.35 times more volatile than Bilendi. It trades about 0.03 of its potential returns per unit of risk. Bilendi is currently generating about 0.06 per unit of risk. If you would invest  1,000.00  in Novatech Industries SA on October 5, 2024 and sell it today you would earn a total of  50.00  from holding Novatech Industries SA or generate 5.0% return on investment over 90 days.

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

Novatech Industries SA  vs.  Bilendi

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.

Bilendi

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bilendi are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Bilendi reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novatech Industries and Bilendi

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

The idea behind Novatech Industries SA and Bilendi 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.