Correlation Between Nova Fund and Banking Fund
Can any of the company-specific risk be diversified away by investing in both Nova Fund and Banking Fund 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 Fund and Banking Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nova Fund Class and Banking Fund Class, you can compare the effects of market volatilities on Nova Fund and Banking Fund 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 Fund with a short position of Banking Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Fund and Banking Fund.
Diversification Opportunities for Nova Fund and Banking Fund
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nova and Banking is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Nova Fund Class and Banking Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banking Fund Class and Nova Fund 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 Fund Class are associated (or correlated) with Banking Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banking Fund Class has no effect on the direction of Nova Fund i.e., Nova Fund and Banking Fund go up and down completely randomly.
Pair Corralation between Nova Fund and Banking Fund
Assuming the 90 days horizon Nova Fund is expected to generate 1.02 times less return on investment than Banking Fund. But when comparing it to its historical volatility, Nova Fund Class is 1.26 times less risky than Banking Fund. It trades about 0.12 of its potential returns per unit of risk. Banking Fund Class is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,351 in Banking Fund Class on September 12, 2024 and sell it today you would earn a total of 2,881 from holding Banking Fund Class or generate 53.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nova Fund Class vs. Banking Fund Class
Performance |
| Timeline |
| Nova Fund Class |
| Banking Fund Class |
Nova Fund and Banking Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nova Fund and Banking Fund
The main advantage of trading using opposite Nova Fund and Banking Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nova Fund position performs unexpectedly, Banking Fund 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 Banking Fund will offset losses from the drop in Banking Fund's long position.| Nova Fund vs. Astor Longshort Fund | Nova Fund vs. Aqr Long Short Equity | Nova Fund vs. Angel Oak Ultrashort | Nova Fund vs. Touchstone Ultra Short |
| Banking Fund vs. Vanguard Financials Index | Banking Fund vs. Regional Bank Fund | Banking Fund vs. Regional Bank Fund | Banking Fund vs. T Rowe Price |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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