Correlation Between Novanta and MKS Instruments

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

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

Diversification Opportunities for Novanta and MKS Instruments

0.75

Correlation Coefficient

Novanta  MKS Instruments

Poor diversification

The 3 months correlation between Novanta and MKS is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Novanta and MKS Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MKS Instruments 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 MKS Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MKS Instruments has no effect on the direction of Novanta i.e., Novanta and MKS Instruments go up and down completely randomly.

Pair Corralation between Novanta and MKS Instruments

Given the investment horizon of 90 days Novanta is expected to generate 0.53 times more return on investment than MKS Instruments. However, Novanta is 1.89 times less risky than MKS Instruments. It trades about -0.14 of its potential returns per unit of risk. MKS Instruments is currently generating about -0.09 per unit of risk. If you would invest  15,229  in Novanta on December 28, 2024 and sell it today you would lose (1,976) from holding Novanta or give up 12.98% of portfolio value over 90 days.

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

Novanta  vs.  MKS Instruments

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.

MKS Instruments

Risk-Adjusted Performance

Very Weak

Over the last 90 days MKS Instruments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Novanta and MKS Instruments

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

The idea behind Novanta and MKS Instruments 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.