Correlation Between Nova Leap and Fresenius
Can any of the company-specific risk be diversified away by investing in both Nova Leap and Fresenius 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 Nova Leap and Fresenius into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nova Leap Health and Fresenius SE Co, you can compare the effects of market volatilities on Nova Leap and Fresenius 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 Nova Leap with a short position of Fresenius. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Leap and Fresenius.
Diversification Opportunities for Nova Leap and Fresenius
Good diversification
The 3 months correlation between Nova and Fresenius is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Nova Leap Health and Fresenius SE Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius SE and Nova Leap 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 Nova Leap Health are associated (or correlated) with Fresenius. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius SE has no effect on the direction of Nova Leap i.e., Nova Leap and Fresenius go up and down completely randomly.
Pair Corralation between Nova Leap and Fresenius
Assuming the 90 days horizon Nova Leap Health is expected to under-perform the Fresenius. In addition to that, Nova Leap is 4.77 times more volatile than Fresenius SE Co. It trades about -0.12 of its total potential returns per unit of risk. Fresenius SE Co is currently generating about -0.16 per unit of volatility. If you would invest 913.00 in Fresenius SE Co on August 25, 2024 and sell it today you would lose (47.00) from holding Fresenius SE Co or give up 5.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Nova Leap Health vs. Fresenius SE Co
Performance |
| Timeline |
| Nova Leap Health |
| Fresenius SE |
Nova Leap and Fresenius Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nova Leap and Fresenius
The main advantage of trading using opposite Nova Leap and Fresenius positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nova Leap position performs unexpectedly, Fresenius 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 Fresenius will offset losses from the drop in Fresenius' long position.The idea behind Nova Leap Health and Fresenius SE Co 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.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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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