Correlation Between Novo Resources and Computer Modelling

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

By analyzing existing cross correlation between Novo Resources Corp and Computer Modelling Group, you can compare the effects of market volatilities on Novo Resources and Computer Modelling 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 Novo Resources with a short position of Computer Modelling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Resources and Computer Modelling.

Diversification Opportunities for Novo Resources and Computer Modelling

0.61

Correlation Coefficient

Novo Resources  Computer Modelling

Poor diversification

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

Pair Corralation between Novo Resources and Computer Modelling

Assuming the 90 days trading horizon Novo Resources Corp is expected to under-perform the Computer Modelling. In addition to that, Novo Resources is 2.19 times more volatile than Computer Modelling Group. It trades about -0.02 of its total potential returns per unit of risk. Computer Modelling Group is currently generating about 0.06 per unit of volatility. If you would invest  560.00  in Computer Modelling Group on October 9, 2024 and sell it today you would earn a total of  483.00  from holding Computer Modelling Group or generate 86.25% return on investment over 90 days.

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

Novo Resources Corp  vs.  Computer Modelling Group

Novo Resources Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Novo Resources Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Novo Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Computer Modelling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Computer Modelling Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Novo Resources and Computer Modelling

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

The idea behind Novo Resources Corp and Computer Modelling Group 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.