Correlation Between Nova and AudioCodes
Can any of the company-specific risk be diversified away by investing in both Nova and AudioCodes 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 AudioCodes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nova and AudioCodes, you can compare the effects of market volatilities on Nova and AudioCodes 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 AudioCodes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova and AudioCodes.
Diversification Opportunities for Nova and AudioCodes
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nova and AudioCodes is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Nova and AudioCodes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AudioCodes 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 AudioCodes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AudioCodes has no effect on the direction of Nova i.e., Nova and AudioCodes go up and down completely randomly.
Pair Corralation between Nova and AudioCodes
Assuming the 90 days trading horizon Nova is expected to under-perform the AudioCodes. In addition to that, Nova is 1.07 times more volatile than AudioCodes. It trades about -0.21 of its total potential returns per unit of risk. AudioCodes is currently generating about -0.1 per unit of volatility. If you would invest 368,900 in AudioCodes on January 23, 2025 and sell it today you would lose (19,900) from holding AudioCodes or give up 5.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nova vs. AudioCodes
Performance |
| Timeline |
| Nova |
| AudioCodes |
Nova and AudioCodes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nova and AudioCodes
The main advantage of trading using opposite Nova and AudioCodes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nova position performs unexpectedly, AudioCodes 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 AudioCodes will offset losses from the drop in AudioCodes' long position.The idea behind Nova and AudioCodes 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.| AudioCodes vs. Nice | AudioCodes vs. Tower Semiconductor | AudioCodes vs. Elbit Systems | AudioCodes 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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