Correlation Between Novatech Industries and Hotel Majestic

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

Diversification Opportunities for Novatech Industries and Hotel Majestic

0.23

Correlation Coefficient

Novatech Industries  Hotel Majestic

Modest diversification

The 3 months correlation between Novatech and Hotel is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Novatech Industries SA and Hotel Majestic Cannes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Majestic Cannes 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 Hotel Majestic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Majestic Cannes has no effect on the direction of Novatech Industries i.e., Novatech Industries and Hotel Majestic go up and down completely randomly.

Pair Corralation between Novatech Industries and Hotel Majestic

Assuming the 90 days trading horizon Novatech Industries SA is expected to under-perform the Hotel Majestic. In addition to that, Novatech Industries is 1.66 times more volatile than Hotel Majestic Cannes. It trades about -0.12 of its total potential returns per unit of risk. Hotel Majestic Cannes is currently generating about 0.06 per unit of volatility. If you would invest  490,000  in Hotel Majestic Cannes on December 29, 2024 and sell it today you would earn a total of  25,000  from holding Hotel Majestic Cannes or generate 5.1% 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.  Hotel Majestic Cannes

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.

Hotel Majestic Cannes

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hotel Majestic Cannes are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Hotel Majestic is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Novatech Industries and Hotel Majestic

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

The idea behind Novatech Industries SA and Hotel Majestic Cannes 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.