Correlation Between Nova and Nice
Can any of the company-specific risk be diversified away by investing in both Nova and Nice 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 Nice into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nova and Nice, you can compare the effects of market volatilities on Nova and Nice 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 Nice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova and Nice.
Diversification Opportunities for Nova and Nice
Excellent diversification
The 3 months correlation between Nova and Nice is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nova and Nice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nice 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 Nice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nice has no effect on the direction of Nova i.e., Nova and Nice go up and down completely randomly.
Pair Corralation between Nova and Nice
Assuming the 90 days trading horizon Nova is expected to generate 1.57 times more return on investment than Nice. However, Nova is 1.57 times more volatile than Nice. It trades about 0.21 of its potential returns per unit of risk. Nice is currently generating about -0.1 per unit of risk. If you would invest 7,601,000 in Nova on November 2, 2024 and sell it today you would earn a total of 1,012,000 from holding Nova or generate 13.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nova vs. Nice
Performance |
| Timeline |
| Nova |
| Nice |
Nova and Nice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nova and Nice
The main advantage of trading using opposite Nova and Nice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nova position performs unexpectedly, Nice 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 Nice will offset losses from the drop in Nice's long position.The idea behind Nova and Nice 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.| Nice vs. Elbit Systems | Nice vs. Tower Semiconductor | Nice vs. Bank Leumi Le Israel | Nice vs. Teva Pharmaceutical Industries |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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