Correlation Between Nova Mentis and Kane Biotech

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

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

Diversification Opportunities for Nova Mentis and Kane Biotech

-0.46

Correlation Coefficient

Nova Mentis  Kane Biotech

Very good diversification

The 3 months correlation between Nova and Kane is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Nova Mentis Life and Kane Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kane Biotech and Nova Mentis 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 Mentis Life are associated (or correlated) with Kane Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kane Biotech has no effect on the direction of Nova Mentis i.e., Nova Mentis and Kane Biotech go up and down completely randomly.

Pair Corralation between Nova Mentis and Kane Biotech

Assuming the 90 days horizon Nova Mentis Life is expected to generate 45.63 times more return on investment than Kane Biotech. However, Nova Mentis is 45.63 times more volatile than Kane Biotech. It trades about 0.14 of its potential returns per unit of risk. Kane Biotech is currently generating about 0.02 per unit of risk. If you would invest  3.58  in Nova Mentis Life on December 24, 2024 and sell it today you would earn a total of  1.77  from holding Nova Mentis Life or generate 49.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

Nova Mentis Life  vs.  Kane Biotech

Nova Mentis Life

Risk-Adjusted Performance

Good

Over the last 90 days Nova Mentis Life has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Nova Mentis reported solid returns over the last few months and may actually be approaching a breakup point.

Kane Biotech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kane Biotech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Kane Biotech is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nova Mentis and Kane Biotech

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

The idea behind Nova Mentis Life and Kane Biotech 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.