Correlation Between Novanta and Hexagon AB
Can any of the company-specific risk be diversified away by investing in both Novanta and Hexagon AB 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 Hexagon AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novanta and Hexagon AB ADR, you can compare the effects of market volatilities on Novanta and Hexagon AB 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 Hexagon AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novanta and Hexagon AB.
Diversification Opportunities for Novanta and Hexagon AB
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Novanta and Hexagon is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Novanta and Hexagon AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexagon AB ADR 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 Hexagon AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexagon AB ADR has no effect on the direction of Novanta i.e., Novanta and Hexagon AB go up and down completely randomly.
Pair Corralation between Novanta and Hexagon AB
Given the investment horizon of 90 days Novanta is expected to under-perform the Hexagon AB. In addition to that, Novanta is 1.5 times more volatile than Hexagon AB ADR. It trades about -0.11 of its total potential returns per unit of risk. Hexagon AB ADR is currently generating about -0.06 per unit of volatility. If you would invest 1,160 in Hexagon AB ADR on December 5, 2024 and sell it today you would lose (23.00) from holding Hexagon AB ADR or give up 1.98% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Novanta vs. Hexagon AB ADR
Performance |
Timeline |
Novanta |
Hexagon AB ADR |
Novanta and Hexagon AB Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Novanta and Hexagon AB
The main advantage of trading using opposite Novanta and Hexagon AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novanta position performs unexpectedly, Hexagon AB 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 Hexagon AB will offset losses from the drop in Hexagon AB's long position.Novanta vs. Mesa Laboratories | Novanta vs. Itron Inc | Novanta vs. Fortive Corp | Novanta vs. Vishay Precision Group |
Hexagon AB vs. Novanta | Hexagon AB vs. Fortive Corp | Hexagon AB vs. Vishay Precision Group | Hexagon AB vs. Itron Inc |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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