Correlation Between Novanta and INVITATION HOMES
Can any of the company-specific risk be diversified away by investing in both Novanta and INVITATION HOMES 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 Novanta and INVITATION HOMES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novanta and INVITATION HOMES DL, you can compare the effects of market volatilities on Novanta and INVITATION HOMES 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 Novanta with a short position of INVITATION HOMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novanta and INVITATION HOMES.
Diversification Opportunities for Novanta and INVITATION HOMES
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Novanta and INVITATION is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Novanta and INVITATION HOMES DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INVITATION HOMES and Novanta 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 Novanta are associated (or correlated) with INVITATION HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INVITATION HOMES has no effect on the direction of Novanta i.e., Novanta and INVITATION HOMES go up and down completely randomly.
Pair Corralation between Novanta and INVITATION HOMES
Assuming the 90 days trading horizon Novanta is expected to generate 1.51 times more return on investment than INVITATION HOMES. However, Novanta is 1.51 times more volatile than INVITATION HOMES DL. It trades about 0.03 of its potential returns per unit of risk. INVITATION HOMES DL is currently generating about 0.03 per unit of risk. If you would invest 12,900 in Novanta on September 14, 2024 and sell it today you would earn a total of 2,800 from holding Novanta or generate 21.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novanta vs. INVITATION HOMES DL
Performance |
| Timeline |
| Novanta |
| INVITATION HOMES |
Novanta and INVITATION HOMES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novanta and INVITATION HOMES
The main advantage of trading using opposite Novanta and INVITATION HOMES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novanta position performs unexpectedly, INVITATION HOMES 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 INVITATION HOMES will offset losses from the drop in INVITATION HOMES's long position.| Novanta vs. INVITATION HOMES DL | Novanta vs. DELTA AIR LINES | Novanta vs. Altair Engineering | Novanta vs. Air New Zealand |
| INVITATION HOMES vs. American Homes 4 | INVITATION HOMES vs. Superior Plus Corp | INVITATION HOMES vs. SIVERS SEMICONDUCTORS AB | INVITATION HOMES vs. NorAm Drilling AS |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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