Correlation Between Nova Leap and Xtract One

Can any of the company-specific risk be diversified away by investing in both Nova Leap and Xtract One 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 Xtract One 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 Xtract One Technologies, you can compare the effects of market volatilities on Nova Leap and Xtract One 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 Xtract One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Leap and Xtract One.

Diversification Opportunities for Nova Leap and Xtract One

0.29

Correlation Coefficient

Nova Leap  Xtract One

Modest diversification

The 3 months correlation between Nova and Xtract is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Nova Leap Health and Xtract One Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtract One Technologies 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 Xtract One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtract One Technologies has no effect on the direction of Nova Leap i.e., Nova Leap and Xtract One go up and down completely randomly.

Pair Corralation between Nova Leap and Xtract One

Assuming the 90 days horizon Nova Leap Health is expected to generate 0.92 times more return on investment than Xtract One. However, Nova Leap Health is 1.09 times less risky than Xtract One. It trades about 0.07 of its potential returns per unit of risk. Xtract One Technologies is currently generating about -0.1 per unit of risk. If you would invest  25.00  in Nova Leap Health on September 26, 2024 and sell it today you would earn a total of  3.00  from holding Nova Leap Health or generate 12.0% return on investment over 90 days.

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

Nova Leap Health  vs.  Xtract One Technologies

Nova Leap Health

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Leap Health are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Nova Leap showed solid returns over the last few months and may actually be approaching a breakup point.

Xtract One Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nova Leap and Xtract One

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

The idea behind Nova Leap Health and Xtract One Technologies 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.