Correlation Between Rocky Mountain and Nova Leap

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

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

Diversification Opportunities for Rocky Mountain and Nova Leap

0.4

Correlation Coefficient

Rocky Mountain  Nova Leap

Very weak diversification

The 3 months correlation between Rocky and Nova is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain Liquor 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 Rocky Mountain 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 Rocky Mountain Liquor 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 Rocky Mountain i.e., Rocky Mountain and Nova Leap go up and down completely randomly.

Pair Corralation between Rocky Mountain and Nova Leap

Assuming the 90 days horizon Rocky Mountain Liquor is expected to under-perform the Nova Leap. In addition to that, Rocky Mountain is 1.19 times more volatile than Nova Leap Health. It trades about -0.01 of its total potential returns per unit of risk. Nova Leap Health is currently generating about 0.01 per unit of volatility. If you would invest  29.00  in Nova Leap Health on October 25, 2024 and sell it today you would lose (4.00) from holding Nova Leap Health or give up 13.79% of portfolio value over 90 days.

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

Rocky Mountain Liquor  vs.  Nova Leap Health

Rocky Mountain Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Mountain Liquor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Nova Leap Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nova Leap Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Rocky Mountain and Nova Leap

The main advantage of trading using opposite Rocky Mountain and Nova Leap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocky Mountain 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 Rocky Mountain Liquor 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.