Correlation Between Novatech Industries and Mauna Kea

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

Diversification Opportunities for Novatech Industries and Mauna Kea

0.36

Correlation Coefficient

Novatech Industries  Mauna Kea

Weak diversification

The 3 months correlation between Novatech and Mauna is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Novatech Industries SA and Mauna Kea Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mauna Kea Technologies 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 Mauna Kea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mauna Kea Technologies has no effect on the direction of Novatech Industries i.e., Novatech Industries and Mauna Kea go up and down completely randomly.

Pair Corralation between Novatech Industries and Mauna Kea

Assuming the 90 days trading horizon Novatech Industries SA is expected to under-perform the Mauna Kea. But the stock apears to be less risky and, when comparing its historical volatility, Novatech Industries SA is 1.41 times less risky than Mauna Kea. The stock trades about -0.13 of its potential returns per unit of risk. The Mauna Kea Technologies is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Mauna Kea Technologies on December 24, 2024 and sell it today you would earn a total of  0.00  from holding Mauna Kea Technologies or generate 0.0% return on investment over 90 days.

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

Novatech Industries SA  vs.  Mauna Kea Technologies

Novatech Industries

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Mauna Kea Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mauna Kea Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Mauna Kea is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Novatech Industries and Mauna Kea

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

The idea behind Novatech Industries SA and Mauna Kea Technologies 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.