Correlation Between Firsthand Technology and Nova Fund

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

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

Diversification Opportunities for Firsthand Technology and Nova Fund

0.77

Correlation Coefficient

Firsthand Technology  Nova Fund

Poor diversification

The 3 months correlation between Firsthand and Nova is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Firsthand Technology Opportuni and Nova Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Fund Class and Firsthand Technology 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 Firsthand Technology Opportunities are associated (or correlated) with Nova Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Fund Class has no effect on the direction of Firsthand Technology i.e., Firsthand Technology and Nova Fund go up and down completely randomly.

Pair Corralation between Firsthand Technology and Nova Fund

Assuming the 90 days horizon Firsthand Technology Opportunities is expected to generate 1.48 times more return on investment than Nova Fund. However, Firsthand Technology is 1.48 times more volatile than Nova Fund Class. It trades about 0.01 of its potential returns per unit of risk. Nova Fund Class is currently generating about -0.09 per unit of risk. If you would invest  395.00  in Firsthand Technology Opportunities on December 22, 2024 and sell it today you would lose (2.00) from holding Firsthand Technology Opportunities or give up 0.51% of portfolio value over 90 days.

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

Firsthand Technology Opportuni  vs.  Nova Fund Class

Firsthand Technology

Risk-Adjusted Performance

Very Weak

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

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Firsthand Technology and Nova Fund

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

The idea behind Firsthand Technology Opportunities and Nova Fund Class 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.