Correlation Between Novatech Industries and Exail Technologies

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

Diversification Opportunities for Novatech Industries and Exail Technologies

0.01

Correlation Coefficient

Novatech Industries  Exail Technologies

Significant diversification

The 3 months correlation between Novatech and Exail is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Novatech Industries SA and Exail Technologies SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exail 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 Exail Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exail Technologies has no effect on the direction of Novatech Industries i.e., Novatech Industries and Exail Technologies go up and down completely randomly.

Pair Corralation between Novatech Industries and Exail Technologies

Assuming the 90 days trading horizon Novatech Industries SA is expected to generate 2.55 times more return on investment than Exail Technologies. However, Novatech Industries is 2.55 times more volatile than Exail Technologies SA. It trades about 0.08 of its potential returns per unit of risk. Exail Technologies SA is currently generating about -0.03 per unit of risk. If you would invest  890.00  in Novatech Industries SA on September 15, 2024 and sell it today you would earn a total of  160.00  from holding Novatech Industries SA or generate 17.98% 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.  Exail Technologies SA

Novatech Industries

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Novatech Industries SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Novatech Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Exail Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exail Technologies SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Exail Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Novatech Industries and Exail Technologies

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

The idea behind Novatech Industries SA and Exail Technologies 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.