Correlation Between Novanta and Coherent

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

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

Diversification Opportunities for Novanta and Coherent

0.85

Correlation Coefficient

Novanta  Coherent

Very poor diversification

The 3 months correlation between Novanta and Coherent is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Novanta and Coherent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coherent and Novanta 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 Novanta are associated (or correlated) with Coherent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coherent has no effect on the direction of Novanta i.e., Novanta and Coherent go up and down completely randomly.

Pair Corralation between Novanta and Coherent

Given the investment horizon of 90 days Novanta is expected to generate 0.32 times more return on investment than Coherent. However, Novanta is 3.14 times less risky than Coherent. It trades about -0.16 of its potential returns per unit of risk. Coherent is currently generating about -0.09 per unit of risk. If you would invest  15,229  in Novanta on December 30, 2024 and sell it today you would lose (2,321) from holding Novanta or give up 15.24% of portfolio value over 90 days.

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

Novanta  vs.  Coherent

Novanta

Risk-Adjusted Performance

Very Weak

Over the last 90 days Novanta 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 comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Coherent

Risk-Adjusted Performance

Very Weak

Over the last 90 days Coherent has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Novanta and Coherent

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

The idea behind Novanta and Coherent 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.