Correlation Between Nova Leap and WashTec AG

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

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

Diversification Opportunities for Nova Leap and WashTec AG

0.27

Correlation Coefficient

Nova Leap  WashTec AG

Modest diversification

The 3 months correlation between Nova and WashTec is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Nova Leap Health and WashTec AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WashTec AG and Nova Leap 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 Leap Health are associated (or correlated) with WashTec AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WashTec AG has no effect on the direction of Nova Leap i.e., Nova Leap and WashTec AG go up and down completely randomly.

Pair Corralation between Nova Leap and WashTec AG

Assuming the 90 days horizon Nova Leap Health is expected to generate 1.34 times more return on investment than WashTec AG. However, Nova Leap is 1.34 times more volatile than WashTec AG. It trades about -0.03 of its potential returns per unit of risk. WashTec AG is currently generating about -0.18 per unit of risk. If you would invest  20.00  in Nova Leap Health on December 21, 2024 and sell it today you would lose (2.00) from holding Nova Leap Health or give up 10.0% of portfolio value over 90 days.

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

Nova Leap Health  vs.  WashTec AG

Nova Leap Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nova Leap Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

WashTec AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days WashTec AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Nova Leap and WashTec AG

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

The idea behind Nova Leap Health and WashTec AG 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.