Correlation Between Nathans Famous and Nova Minerals

Can any of the company-specific risk be diversified away by investing in both Nathans Famous and Nova Minerals 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 Nathans Famous and Nova Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nathans Famous and Nova Minerals Limited, you can compare the effects of market volatilities on Nathans Famous and Nova Minerals 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 Nathans Famous with a short position of Nova Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nathans Famous and Nova Minerals.

Diversification Opportunities for Nathans Famous and Nova Minerals

-0.76

Correlation Coefficient

Nathans Famous  Nova Minerals

Pay attention - limited upside

The 3 months correlation between Nathans and Nova is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Nathans Famous and Nova Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Minerals Limited and Nathans Famous 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 Nathans Famous are associated (or correlated) with Nova Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Minerals Limited has no effect on the direction of Nathans Famous i.e., Nathans Famous and Nova Minerals go up and down completely randomly.

Pair Corralation between Nathans Famous and Nova Minerals

Given the investment horizon of 90 days Nathans Famous is expected to generate 0.12 times more return on investment than Nova Minerals. However, Nathans Famous is 8.51 times less risky than Nova Minerals. It trades about -0.12 of its potential returns per unit of risk. Nova Minerals Limited is currently generating about -0.07 per unit of risk. If you would invest  7,978  in Nathans Famous on October 24, 2024 and sell it today you would lose (170.00) from holding Nathans Famous or give up 2.13% of portfolio value over 90 days.

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

Nathans Famous  vs.  Nova Minerals Limited

Nathans Famous

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nathans Famous has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Nathans Famous is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Nova Minerals Limited

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Minerals Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Nova Minerals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nathans Famous and Nova Minerals

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

The idea behind Nathans Famous and Nova Minerals Limited 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..