Correlation Between P3 Health and Nova Leap

Can any of the company-specific risk be diversified away by investing in both P3 Health and Nova Leap 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 P3 Health and Nova Leap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between P3 Health Partners and Nova Leap Health, you can compare the effects of market volatilities on P3 Health and Nova Leap 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 P3 Health with a short position of Nova Leap. Check out your portfolio center. Please also check ongoing floating volatility patterns of P3 Health and Nova Leap.

Diversification Opportunities for P3 Health and Nova Leap

-0.05

Correlation Coefficient

P3 Health  Nova Leap

Good diversification

The 3 months correlation between PIII and Nova is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding P3 Health Partners and Nova Leap Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Leap Health and P3 Health 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 P3 Health Partners are associated (or correlated) with Nova Leap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Leap Health has no effect on the direction of P3 Health i.e., P3 Health and Nova Leap go up and down completely randomly.

Pair Corralation between P3 Health and Nova Leap

Given the investment horizon of 90 days P3 Health Partners is expected to under-perform the Nova Leap. In addition to that, P3 Health is 1.11 times more volatile than Nova Leap Health. It trades about -0.07 of its total potential returns per unit of risk. Nova Leap Health is currently generating about 0.05 per unit of volatility. If you would invest  17.00  in Nova Leap Health on September 3, 2024 and sell it today you would earn a total of  1.00  from holding Nova Leap Health or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

P3 Health Partners  vs.  Nova Leap Health

P3 Health Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days P3 Health Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Nova Leap Health

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Leap Health are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Nova Leap reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with P3 Health and Nova Leap

The main advantage of trading using opposite P3 Health and Nova Leap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if P3 Health position performs unexpectedly, Nova Leap 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 Nova Leap will offset losses from the drop in Nova Leap's long position.

The idea behind P3 Health Partners and Nova Leap Health 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.