Correlation Between Nova Mentis and Living Cell

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

Diversification Opportunities for Nova Mentis and Living Cell

-0.19

Correlation Coefficient

Nova Mentis  Living Cell

Good diversification

The 3 months correlation between Nova and Living is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Nova Mentis Life and Living Cell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Living Cell Technologies 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 Living Cell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Living Cell Technologies has no effect on the direction of Nova Mentis i.e., Nova Mentis and Living Cell go up and down completely randomly.

Pair Corralation between Nova Mentis and Living Cell

Assuming the 90 days horizon Nova Mentis Life is expected to generate 5.15 times more return on investment than Living Cell. However, Nova Mentis is 5.15 times more volatile than Living Cell Technologies. It trades about 0.05 of its potential returns per unit of risk. Living Cell Technologies is currently generating about 0.22 per unit of risk. If you would invest  2.77  in Nova Mentis Life on September 24, 2024 and sell it today you would lose (0.52) from holding Nova Mentis Life or give up 18.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Nova Mentis Life  vs.  Living Cell Technologies

Nova Mentis Life

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Mentis Life are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nova Mentis reported solid returns over the last few months and may actually be approaching a breakup point.

Living Cell Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Living Cell Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Nova Mentis and Living Cell

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

The idea behind Nova Mentis Life and Living Cell 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.