Correlation Between North East and Nova Organic

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

By analyzing existing cross correlation between North East Rubbers and Nova Organic PCL, you can compare the effects of market volatilities on North East and Nova Organic 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 North East with a short position of Nova Organic. Check out your portfolio center. Please also check ongoing floating volatility patterns of North East and Nova Organic.

Diversification Opportunities for North East and Nova Organic

0.9

Correlation Coefficient

North East  Nova Organic

Almost no diversification

The 3 months correlation between North and Nova is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding North East Rubbers and Nova Organic PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Organic PCL and North East 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 North East Rubbers are associated (or correlated) with Nova Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Organic PCL has no effect on the direction of North East i.e., North East and Nova Organic go up and down completely randomly.

Pair Corralation between North East and Nova Organic

Assuming the 90 days trading horizon North East Rubbers is expected to generate 0.38 times more return on investment than Nova Organic. However, North East Rubbers is 2.65 times less risky than Nova Organic. It trades about -0.16 of its potential returns per unit of risk. Nova Organic PCL is currently generating about -0.19 per unit of risk. If you would invest  530.00  in North East Rubbers on October 6, 2024 and sell it today you would lose (62.00) from holding North East Rubbers or give up 11.7% of portfolio value over 90 days.

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

North East Rubbers  vs.  Nova Organic PCL

North East Rubbers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North East Rubbers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Nova Organic PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nova Organic PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with North East and Nova Organic

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

The idea behind North East Rubbers and Nova Organic PCL 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.