Correlation Between Western Acquisition and Nova Vision

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

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

Diversification Opportunities for Western Acquisition and Nova Vision

0.51

Correlation Coefficient

Western Acquisition  Nova Vision

Very weak diversification

The 3 months correlation between Western and Nova is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Western Acquisition Ventures and Nova Vision Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Vision Acquisition and Western Acquisition 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 Western Acquisition Ventures are associated (or correlated) with Nova Vision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Vision Acquisition has no effect on the direction of Western Acquisition i.e., Western Acquisition and Nova Vision go up and down completely randomly.

Pair Corralation between Western Acquisition and Nova Vision

Assuming the 90 days horizon Western Acquisition is expected to generate 28.27 times less return on investment than Nova Vision. But when comparing it to its historical volatility, Western Acquisition Ventures is 37.89 times less risky than Nova Vision. It trades about 0.17 of its potential returns per unit of risk. Nova Vision Acquisition is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,219  in Nova Vision Acquisition on September 3, 2024 and sell it today you would earn a total of  2,481  from holding Nova Vision Acquisition or generate 203.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Western Acquisition Ventures  vs.  Nova Vision Acquisition

Western Acquisition

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Western Acquisition may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nova Vision Acquisition

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Vision Acquisition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Nova Vision showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Acquisition and Nova Vision

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

The idea behind Western Acquisition Ventures and Nova Vision Acquisition 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.