Correlation Between Nova and Opal Balance

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

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

Diversification Opportunities for Nova and Opal Balance

0.61

Correlation Coefficient

Nova  Opal Balance

Poor diversification

The 3 months correlation between Nova and Opal is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Nova and Opal Balance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opal Balance 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 Opal Balance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opal Balance has no effect on the direction of Nova i.e., Nova and Opal Balance go up and down completely randomly.

Pair Corralation between Nova and Opal Balance

Assuming the 90 days trading horizon Nova is expected to generate 3.03 times less return on investment than Opal Balance. In addition to that, Nova is 1.83 times more volatile than Opal Balance. It trades about 0.02 of its total potential returns per unit of risk. Opal Balance is currently generating about 0.09 per unit of volatility. If you would invest  21,548  in Opal Balance on December 29, 2024 and sell it today you would earn a total of  1,942  from holding Opal Balance or generate 9.01% return on investment over 90 days.

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

Nova  vs.  Opal Balance

Nova

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nova are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nova is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Opal Balance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Opal Balance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Opal Balance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nova and Opal Balance

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

The idea behind Nova and Opal Balance 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.