Correlation Between Nova Leap and North American

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

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

Diversification Opportunities for Nova Leap and North American

0.65

Correlation Coefficient

Nova Leap  North American

Poor diversification

The 3 months correlation between Nova and North is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Nova Leap Health and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const and Nova Leap 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 Nova Leap Health are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of Nova Leap i.e., Nova Leap and North American go up and down completely randomly.

Pair Corralation between Nova Leap and North American

Assuming the 90 days horizon Nova Leap Health is expected to generate 1.97 times more return on investment than North American. However, Nova Leap is 1.97 times more volatile than North American Construction. It trades about -0.02 of its potential returns per unit of risk. North American Construction is currently generating about -0.19 per unit of risk. If you would invest  27.00  in Nova Leap Health on December 28, 2024 and sell it today you would lose (3.00) from holding Nova Leap Health or give up 11.11% of portfolio value over 90 days.

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

Nova Leap Health  vs.  North American Construction

Nova Leap Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nova Leap Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Nova Leap is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

North American Const

Risk-Adjusted Performance

Very Weak

Over the last 90 days North American Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Nova Leap and North American

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

The idea behind Nova Leap Health and North American Construction 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.