Correlation Between BP Plastics and Nova Wellness
Can any of the company-specific risk be diversified away by investing in both BP Plastics and Nova Wellness 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 BP Plastics and Nova Wellness into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP Plastics Holding and Nova Wellness Group, you can compare the effects of market volatilities on BP Plastics and Nova Wellness 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 BP Plastics with a short position of Nova Wellness. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Plastics and Nova Wellness.
Diversification Opportunities for BP Plastics and Nova Wellness
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between 5100 and Nova is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding BP Plastics Holding and Nova Wellness Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Wellness Group and BP Plastics 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 BP Plastics Holding are associated (or correlated) with Nova Wellness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Wellness Group has no effect on the direction of BP Plastics i.e., BP Plastics and Nova Wellness go up and down completely randomly.
Pair Corralation between BP Plastics and Nova Wellness
Assuming the 90 days trading horizon BP Plastics Holding is expected to generate 0.54 times more return on investment than Nova Wellness. However, BP Plastics Holding is 1.87 times less risky than Nova Wellness. It trades about -0.05 of its potential returns per unit of risk. Nova Wellness Group is currently generating about -0.06 per unit of risk. If you would invest 127.00 in BP Plastics Holding on August 28, 2024 and sell it today you would lose (5.00) from holding BP Plastics Holding or give up 3.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BP Plastics Holding vs. Nova Wellness Group
Performance |
| Timeline |
| BP Plastics Holding |
| Nova Wellness Group |
BP Plastics and Nova Wellness Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP Plastics and Nova Wellness
The main advantage of trading using opposite BP Plastics and Nova Wellness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Plastics position performs unexpectedly, Nova Wellness 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 Wellness will offset losses from the drop in Nova Wellness' long position.| BP Plastics vs. Aurelius Technologies Bhd | BP Plastics vs. FARM FRESH BERHAD | BP Plastics vs. Nova Wellness Group | BP Plastics vs. Magni Tech Industries |
| Nova Wellness vs. Daya Materials Bhd | Nova Wellness vs. Senheng New Retail | Nova Wellness vs. Tex Cycle Technology | Nova Wellness vs. BP Plastics Holding |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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