Correlation Between Novanta and Trimble

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

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

Diversification Opportunities for Novanta and Trimble

0.49

Correlation Coefficient

Novanta  Trimble

Very weak diversification

The 3 months correlation between Novanta and Trimble is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Novanta and Trimble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trimble 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 Trimble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trimble has no effect on the direction of Novanta i.e., Novanta and Trimble go up and down completely randomly.

Pair Corralation between Novanta and Trimble

Given the investment horizon of 90 days Novanta is expected to under-perform the Trimble. But the stock apears to be less risky and, when comparing its historical volatility, Novanta is 1.03 times less risky than Trimble. The stock trades about -0.14 of its potential returns per unit of risk. The Trimble is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  7,043  in Trimble on December 28, 2024 and sell it today you would lose (472.00) from holding Trimble or give up 6.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Novanta  vs.  Trimble

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.

Trimble

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trimble has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Trimble is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Novanta and Trimble

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

The idea behind Novanta and Trimble 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.