Correlation Between Novanta and Spectris Plc

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

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

Diversification Opportunities for Novanta and Spectris Plc

0.41

Correlation Coefficient

Novanta  Spectris Plc

Very weak diversification

The 3 months correlation between Novanta and Spectris is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Novanta and Spectris plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectris plc 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 Spectris Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectris plc has no effect on the direction of Novanta i.e., Novanta and Spectris Plc go up and down completely randomly.

Pair Corralation between Novanta and Spectris Plc

Given the investment horizon of 90 days Novanta is expected to under-perform the Spectris Plc. But the stock apears to be less risky and, when comparing its historical volatility, Novanta is 2.1 times less risky than Spectris Plc. The stock trades about -0.16 of its potential returns per unit of risk. The Spectris plc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,935  in Spectris plc on December 30, 2024 and sell it today you would earn a total of  123.00  from holding Spectris plc or generate 4.19% return on investment over 90 days.

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

Novanta  vs.  Spectris plc

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.

Spectris plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spectris plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting forward-looking indicators, Spectris Plc may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Novanta and Spectris Plc

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

The idea behind Novanta and Spectris plc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.