Correlation Between NovaBay Pharmaceuticals and Thermo Fisher

Can any of the company-specific risk be diversified away by investing in both NovaBay Pharmaceuticals and Thermo Fisher 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 NovaBay Pharmaceuticals and Thermo Fisher into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NovaBay Pharmaceuticals and Thermo Fisher Scientific, you can compare the effects of market volatilities on NovaBay Pharmaceuticals and Thermo Fisher 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 NovaBay Pharmaceuticals with a short position of Thermo Fisher. Check out your portfolio center. Please also check ongoing floating volatility patterns of NovaBay Pharmaceuticals and Thermo Fisher.

Diversification Opportunities for NovaBay Pharmaceuticals and Thermo Fisher

0.62

Correlation Coefficient

NovaBay Pharmaceuticals  Thermo Fisher

Poor diversification

The 3 months correlation between NovaBay and Thermo is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding NovaBay Pharmaceuticals and Thermo Fisher Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermo Fisher Scientific and NovaBay Pharmaceuticals 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 NovaBay Pharmaceuticals are associated (or correlated) with Thermo Fisher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermo Fisher Scientific has no effect on the direction of NovaBay Pharmaceuticals i.e., NovaBay Pharmaceuticals and Thermo Fisher go up and down completely randomly.

Pair Corralation between NovaBay Pharmaceuticals and Thermo Fisher

Considering the 90-day investment horizon NovaBay Pharmaceuticals is expected to generate 3.05 times more return on investment than Thermo Fisher. However, NovaBay Pharmaceuticals is 3.05 times more volatile than Thermo Fisher Scientific. It trades about 0.03 of its potential returns per unit of risk. Thermo Fisher Scientific is currently generating about -0.01 per unit of risk. If you would invest  59.00  in NovaBay Pharmaceuticals on December 29, 2024 and sell it today you would earn a total of  2.00  from holding NovaBay Pharmaceuticals or generate 3.39% return on investment over 90 days.

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

NovaBay Pharmaceuticals  vs.  Thermo Fisher Scientific

NovaBay Pharmaceuticals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NovaBay Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, NovaBay Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Thermo Fisher Scientific

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thermo Fisher Scientific has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Thermo Fisher is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NovaBay Pharmaceuticals and Thermo Fisher

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

The idea behind NovaBay Pharmaceuticals and Thermo Fisher Scientific 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.