Correlation Between Nova and Aehr Test
Can any of the company-specific risk be diversified away by investing in both Nova and Aehr Test 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 Aehr Test into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nova and Aehr Test Systems, you can compare the effects of market volatilities on Nova and Aehr Test 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 Aehr Test. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova and Aehr Test.
Diversification Opportunities for Nova and Aehr Test
Modest diversification
The 3 months correlation between Nova and Aehr is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nova and Aehr Test Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aehr Test Systems 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 Aehr Test. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aehr Test Systems has no effect on the direction of Nova i.e., Nova and Aehr Test go up and down completely randomly.
Pair Corralation between Nova and Aehr Test
Given the investment horizon of 90 days Nova is expected to generate 0.82 times more return on investment than Aehr Test. However, Nova is 1.21 times less risky than Aehr Test. It trades about -0.07 of its potential returns per unit of risk. Aehr Test Systems is currently generating about -0.2 per unit of risk. If you would invest 18,906 in Nova on August 28, 2024 and sell it today you would lose (1,296) from holding Nova or give up 6.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nova vs. Aehr Test Systems
Performance |
| Timeline |
| Nova |
| Aehr Test Systems |
Nova and Aehr Test Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nova and Aehr Test
The main advantage of trading using opposite Nova and Aehr Test positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nova position performs unexpectedly, Aehr Test 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 Aehr Test will offset losses from the drop in Aehr Test's long position.The idea behind Nova and Aehr Test Systems 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.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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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