Correlation Between Nova and Opko Health
Can any of the company-specific risk be diversified away by investing in both Nova and Opko Health 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 Opko Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nova and Opko Health, you can compare the effects of market volatilities on Nova and Opko Health 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 Opko Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova and Opko Health.
Diversification Opportunities for Nova and Opko Health
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Nova and Opko is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Nova and Opko Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opko Health 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 Opko Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opko Health has no effect on the direction of Nova i.e., Nova and Opko Health go up and down completely randomly.
Pair Corralation between Nova and Opko Health
Assuming the 90 days trading horizon Nova is expected to generate 0.63 times more return on investment than Opko Health. However, Nova is 1.58 times less risky than Opko Health. It trades about 0.09 of its potential returns per unit of risk. Opko Health is currently generating about 0.04 per unit of risk. If you would invest 3,106,000 in Nova on August 31, 2024 and sell it today you would earn a total of 3,409,000 from holding Nova or generate 109.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nova vs. Opko Health
Performance |
| Timeline |
| Nova |
| Opko Health |
Nova and Opko Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nova and Opko Health
The main advantage of trading using opposite Nova and Opko Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nova position performs unexpectedly, Opko Health 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 Opko Health will offset losses from the drop in Opko Health's long position.The idea behind Nova and Opko Health 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.| Opko Health vs. Teva Pharmaceutical Industries | Opko Health vs. Tower Semiconductor | Opko Health vs. Nice | Opko Health vs. Kamada |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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