Correlation Between Coherent and Novanta
Can any of the company-specific risk be diversified away by investing in both Coherent and Novanta 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 Coherent and Novanta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coherent and Novanta, you can compare the effects of market volatilities on Coherent and Novanta 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 Coherent with a short position of Novanta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coherent and Novanta.
Diversification Opportunities for Coherent and Novanta
Average diversification
The 3 months correlation between Coherent and Novanta is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Coherent and Novanta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novanta and Coherent 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 Coherent are associated (or correlated) with Novanta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novanta has no effect on the direction of Coherent i.e., Coherent and Novanta go up and down completely randomly.
Pair Corralation between Coherent and Novanta
Given the investment horizon of 90 days Coherent is expected to generate 1.61 times more return on investment than Novanta. However, Coherent is 1.61 times more volatile than Novanta. It trades about 0.1 of its potential returns per unit of risk. Novanta is currently generating about 0.01 per unit of risk. If you would invest 5,948 in Coherent on August 27, 2024 and sell it today you would earn a total of 4,586 from holding Coherent or generate 77.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coherent vs. Novanta
Performance |
| Timeline |
| Coherent |
| Novanta |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Coherent and Novanta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coherent and Novanta
The main advantage of trading using opposite Coherent and Novanta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coherent position performs unexpectedly, Novanta 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 Novanta will offset losses from the drop in Novanta's long position.The idea behind Coherent and Novanta 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.| Novanta vs. Mesa Laboratories | Novanta vs. Itron Inc | Novanta vs. Fortive Corp | Novanta vs. ESCO Technologies |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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