Correlation Between Monnari Trade and Novina SA

Can any of the company-specific risk be diversified away by investing in both Monnari Trade and Novina SA 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 Monnari Trade and Novina SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Monnari Trade SA and Novina SA, you can compare the effects of market volatilities on Monnari Trade and Novina SA 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 Monnari Trade with a short position of Novina SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monnari Trade and Novina SA.

Diversification Opportunities for Monnari Trade and Novina SA

-0.4

Correlation Coefficient

Monnari Trade  Novina SA

Very good diversification

The 3 months correlation between Monnari and Novina is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Monnari Trade SA and Novina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novina SA and Monnari Trade 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 Monnari Trade SA are associated (or correlated) with Novina SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novina SA has no effect on the direction of Monnari Trade i.e., Monnari Trade and Novina SA go up and down completely randomly.

Pair Corralation between Monnari Trade and Novina SA

Assuming the 90 days trading horizon Monnari Trade SA is expected to under-perform the Novina SA. But the stock apears to be less risky and, when comparing its historical volatility, Monnari Trade SA is 2.61 times less risky than Novina SA. The stock trades about -0.06 of its potential returns per unit of risk. The Novina SA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  110.00  in Novina SA on December 24, 2024 and sell it today you would lose (5.00) from holding Novina SA or give up 4.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Monnari Trade SA  vs.  Novina SA

Monnari Trade SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monnari Trade SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Monnari Trade is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Novina SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Novina SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Novina SA 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 Monnari Trade and Novina SA

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

The idea behind Monnari Trade SA and Novina 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.