Correlation Between Nova and Buff Technologies
Can any of the company-specific risk be diversified away by investing in both Nova and Buff Technologies 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 Buff Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nova and Buff Technologies, you can compare the effects of market volatilities on Nova and Buff Technologies 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 Buff Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova and Buff Technologies.
Diversification Opportunities for Nova and Buff Technologies
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nova and Buff is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Nova and Buff Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buff Technologies 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 Buff Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buff Technologies has no effect on the direction of Nova i.e., Nova and Buff Technologies go up and down completely randomly.
Pair Corralation between Nova and Buff Technologies
Assuming the 90 days trading horizon Nova is expected to generate 1.37 times less return on investment than Buff Technologies. But when comparing it to its historical volatility, Nova is 2.39 times less risky than Buff Technologies. It trades about 0.19 of its potential returns per unit of risk. Buff Technologies is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 168,500 in Buff Technologies on November 28, 2024 and sell it today you would earn a total of 19,500 from holding Buff Technologies or generate 11.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nova vs. Buff Technologies
Performance |
| Timeline |
| Nova |
| Buff Technologies |
Nova and Buff Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nova and Buff Technologies
The main advantage of trading using opposite Nova and Buff Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nova position performs unexpectedly, Buff Technologies 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 Buff Technologies will offset losses from the drop in Buff Technologies' long position.The idea behind Nova and Buff Technologies 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.| Buff Technologies vs. Feat Fund Investments | Buff Technologies vs. Analyst IMS Investment | Buff Technologies vs. Discount Investment Corp | Buff Technologies vs. Harel Insurance Investments |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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