Correlation Between Nova and InTest

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

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

Diversification Opportunities for Nova and InTest

0.37

Correlation Coefficient

Nova  InTest

Weak diversification

The 3 months correlation between Nova and InTest is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Nova and inTest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on inTest 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 InTest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of inTest has no effect on the direction of Nova i.e., Nova and InTest go up and down completely randomly.

Pair Corralation between Nova and InTest

Given the investment horizon of 90 days Nova is expected to generate 1.15 times more return on investment than InTest. However, Nova is 1.15 times more volatile than inTest. It trades about 0.01 of its potential returns per unit of risk. inTest is currently generating about -0.05 per unit of risk. If you would invest  19,718  in Nova on December 28, 2024 and sell it today you would lose (435.00) from holding Nova or give up 2.21% of portfolio value over 90 days.

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

Nova  vs.  inTest

Nova

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nova has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Nova is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

inTest

Risk-Adjusted Performance

Very Weak

Over the last 90 days inTest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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 Nova and InTest

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

The idea behind Nova and inTest 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.