Correlation Between Nova and Israel Opportunity

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

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

Diversification Opportunities for Nova and Israel Opportunity

-0.3

Correlation Coefficient

Nova  Israel Opportunity

Very good diversification

The 3 months correlation between Nova and Israel is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Nova and Israel Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel Opportunity and Nova 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 are associated (or correlated) with Israel Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel Opportunity has no effect on the direction of Nova i.e., Nova and Israel Opportunity go up and down completely randomly.

Pair Corralation between Nova and Israel Opportunity

Assuming the 90 days trading horizon Nova is expected to under-perform the Israel Opportunity. In addition to that, Nova is 1.37 times more volatile than Israel Opportunity . It trades about -0.1 of its total potential returns per unit of risk. Israel Opportunity is currently generating about -0.04 per unit of volatility. If you would invest  7,850  in Israel Opportunity on September 1, 2024 and sell it today you would lose (530.00) from holding Israel Opportunity or give up 6.75% of portfolio value over 90 days.

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

Nova  vs.  Israel Opportunity

Nova

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nova 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 basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Israel Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nova and Israel Opportunity

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

The idea behind Nova and Israel Opportunity 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.