Correlation Between NOHO and DNA Brands
Can any of the company-specific risk be diversified away by investing in both NOHO and DNA Brands 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 NOHO and DNA Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NOHO Inc and DNA Brands, you can compare the effects of market volatilities on NOHO and DNA Brands 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 NOHO with a short position of DNA Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of NOHO and DNA Brands.
Diversification Opportunities for NOHO and DNA Brands
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between NOHO and DNA is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding NOHO Inc and DNA Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DNA Brands and NOHO 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 NOHO Inc are associated (or correlated) with DNA Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DNA Brands has no effect on the direction of NOHO i.e., NOHO and DNA Brands go up and down completely randomly.
Pair Corralation between NOHO and DNA Brands
Given the investment horizon of 90 days NOHO Inc is expected to generate 1.4 times more return on investment than DNA Brands. However, NOHO is 1.4 times more volatile than DNA Brands. It trades about 0.15 of its potential returns per unit of risk. DNA Brands is currently generating about 0.07 per unit of risk. If you would invest 0.01 in NOHO Inc on August 31, 2024 and sell it today you would earn a total of 0.01 from holding NOHO Inc or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
NOHO Inc vs. DNA Brands
Performance |
| Timeline |
| NOHO Inc |
| DNA Brands |
NOHO and DNA Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NOHO and DNA Brands
The main advantage of trading using opposite NOHO and DNA Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NOHO position performs unexpectedly, DNA Brands 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 DNA Brands will offset losses from the drop in DNA Brands' long position.The idea behind NOHO Inc and DNA Brands 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.| DNA Brands vs. Rocky Mountain High | DNA Brands vs. Fbec Worldwide | DNA Brands vs. Greene Concepts | DNA Brands vs. Keurig Dr Pepper |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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