Correlation Between Nova Organic and Bank of Ayudhya

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

By analyzing existing cross correlation between Nova Organic PCL and Bank of Ayudhya, you can compare the effects of market volatilities on Nova Organic and Bank of Ayudhya 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 Nova Organic with a short position of Bank of Ayudhya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Organic and Bank of Ayudhya.

Diversification Opportunities for Nova Organic and Bank of Ayudhya

0.72

Correlation Coefficient

Nova Organic  Bank of Ayudhya

Poor diversification

The 3 months correlation between Nova and Bank is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Nova Organic PCL and Bank of Ayudhya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Ayudhya and Nova Organic 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 Nova Organic PCL are associated (or correlated) with Bank of Ayudhya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Ayudhya has no effect on the direction of Nova Organic i.e., Nova Organic and Bank of Ayudhya go up and down completely randomly.

Pair Corralation between Nova Organic and Bank of Ayudhya

Assuming the 90 days horizon Nova Organic PCL is expected to generate 5.44 times more return on investment than Bank of Ayudhya. However, Nova Organic is 5.44 times more volatile than Bank of Ayudhya. It trades about 0.01 of its potential returns per unit of risk. Bank of Ayudhya is currently generating about -0.11 per unit of risk. If you would invest  83.00  in Nova Organic PCL on December 28, 2024 and sell it today you would lose (3.00) from holding Nova Organic PCL or give up 3.61% of portfolio value over 90 days.

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

Nova Organic PCL  vs.  Bank of Ayudhya

Nova Organic PCL

Risk-Adjusted Performance

Insignificant

Over the last 90 days Nova Organic PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Nova Organic is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bank of Ayudhya

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of Ayudhya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Nova Organic and Bank of Ayudhya

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

The idea behind Nova Organic PCL and Bank of Ayudhya 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.