Correlation Between Nova and Aerodrome
Can any of the company-specific risk be diversified away by investing in both Nova and Aerodrome 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 and Aerodrome into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nova and Aerodrome Group, you can compare the effects of market volatilities on Nova and Aerodrome 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 with a short position of Aerodrome. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova and Aerodrome.
Diversification Opportunities for Nova and Aerodrome
Very good diversification
The 3 months correlation between Nova and Aerodrome is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Nova and Aerodrome Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerodrome Group and Nova 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 are associated (or correlated) with Aerodrome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerodrome Group has no effect on the direction of Nova i.e., Nova and Aerodrome go up and down completely randomly.
Pair Corralation between Nova and Aerodrome
Assuming the 90 days trading horizon Nova is expected to generate 1.49 times less return on investment than Aerodrome. But when comparing it to its historical volatility, Nova is 2.89 times less risky than Aerodrome. It trades about 0.08 of its potential returns per unit of risk. Aerodrome Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5,240 in Aerodrome Group on August 29, 2024 and sell it today you would earn a total of 1,890 from holding Aerodrome Group or generate 36.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nova vs. Aerodrome Group
Performance |
| Timeline |
| Nova |
| Aerodrome Group |
Nova and Aerodrome Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nova and Aerodrome
The main advantage of trading using opposite Nova and Aerodrome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nova position performs unexpectedly, Aerodrome 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 Aerodrome will offset losses from the drop in Aerodrome's long position.The idea behind Nova and Aerodrome Group 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.| Aerodrome vs. Tower Semiconductor | Aerodrome vs. Israel Discount Bank | Aerodrome vs. Holmes Place International | Aerodrome vs. Nova |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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