Correlation Between Novatech Industries and Eutelsat Communications

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

Diversification Opportunities for Novatech Industries and Eutelsat Communications

-0.15

Correlation Coefficient

Novatech Industries  Eutelsat Communications

Good diversification

The 3 months correlation between Novatech and Eutelsat is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Novatech Industries SA and Eutelsat Communications SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eutelsat Communications 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 Eutelsat Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eutelsat Communications has no effect on the direction of Novatech Industries i.e., Novatech Industries and Eutelsat Communications go up and down completely randomly.

Pair Corralation between Novatech Industries and Eutelsat Communications

Assuming the 90 days trading horizon Novatech Industries SA is expected to generate 1.07 times more return on investment than Eutelsat Communications. However, Novatech Industries is 1.07 times more volatile than Eutelsat Communications SA. It trades about -0.01 of its potential returns per unit of risk. Eutelsat Communications SA is currently generating about -0.34 per unit of risk. If you would invest  1,100  in Novatech Industries SA on October 5, 2024 and sell it today you would lose (50.00) from holding Novatech Industries SA or give up 4.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Novatech Industries SA  vs.  Eutelsat Communications 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.

Eutelsat Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eutelsat Communications SA 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 essential indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Novatech Industries and Eutelsat Communications

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

The idea behind Novatech Industries SA and Eutelsat Communications 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.