Correlation Between Novanta and Vontier Corp

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

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

Diversification Opportunities for Novanta and Vontier Corp

0.63

Correlation Coefficient

Novanta  Vontier Corp

Poor diversification

The 3 months correlation between Novanta and Vontier is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Novanta and Vontier Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vontier Corp 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 Vontier Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vontier Corp has no effect on the direction of Novanta i.e., Novanta and Vontier Corp go up and down completely randomly.

Pair Corralation between Novanta and Vontier Corp

Given the investment horizon of 90 days Novanta is expected to under-perform the Vontier Corp. But the stock apears to be less risky and, when comparing its historical volatility, Novanta is 1.07 times less risky than Vontier Corp. The stock trades about -0.16 of its potential returns per unit of risk. The Vontier Corp is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  3,619  in Vontier Corp on December 29, 2024 and sell it today you would lose (265.00) from holding Vontier Corp or give up 7.32% of portfolio value over 90 days.

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

Novanta  vs.  Vontier Corp

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.

Vontier Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vontier Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Novanta and Vontier Corp

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

The idea behind Novanta and Vontier Corp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.