Correlation Between Nova Fund and Inverse Sp

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

By analyzing existing cross correlation between Nova Fund Class and Inverse Sp 500, you can compare the effects of market volatilities on Nova Fund and Inverse Sp 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 Fund with a short position of Inverse Sp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Fund and Inverse Sp.

Diversification Opportunities for Nova Fund and Inverse Sp

-0.94

Correlation Coefficient

Nova Fund  Inverse Sp

Pay attention - limited upside

The 3 months correlation between Nova and Inverse is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Nova Fund Class and Inverse Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Sp 500 and Nova Fund 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 Fund Class are associated (or correlated) with Inverse Sp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Sp 500 has no effect on the direction of Nova Fund i.e., Nova Fund and Inverse Sp go up and down completely randomly.

Pair Corralation between Nova Fund and Inverse Sp

Assuming the 90 days horizon Nova Fund Class is expected to under-perform the Inverse Sp. In addition to that, Nova Fund is 1.49 times more volatile than Inverse Sp 500. It trades about -0.06 of its total potential returns per unit of risk. Inverse Sp 500 is currently generating about 0.08 per unit of volatility. If you would invest  9,940  in Inverse Sp 500 on December 28, 2024 and sell it today you would earn a total of  442.00  from holding Inverse Sp 500 or generate 4.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Nova Fund Class  vs.  Inverse Sp 500

Nova Fund Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nova Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Nova Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Inverse Sp 500

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Sp 500 are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Inverse Sp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nova Fund and Inverse Sp

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

The idea behind Nova Fund Class and Inverse Sp 500 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.