Correlation Between Inverse Sp and Nova Fund

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Can any of the company-specific risk be diversified away by investing in both Inverse Sp and Nova 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 Inverse Sp and Nova Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse Sp 500 and Nova Fund Class, you can compare the effects of market volatilities on Inverse Sp and Nova 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 Inverse Sp with a short position of Nova Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Sp and Nova Fund.

Diversification Opportunities for Inverse Sp and Nova Fund

InverseNovaDiversified AwayInverseNovaDiversified Away100%
-0.79
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Inverse and Nova is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Sp 500 and Nova Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Fund Class and Inverse Sp 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 Inverse Sp 500 are associated (or correlated) with Nova Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Fund Class has no effect on the direction of Inverse Sp i.e., Inverse Sp and Nova Fund go up and down completely randomly.

Pair Corralation between Inverse Sp and Nova Fund

Assuming the 90 days horizon Inverse Sp 500 is expected to generate 0.66 times more return on investment than Nova Fund. However, Inverse Sp 500 is 1.52 times less risky than Nova Fund. It trades about 0.03 of its potential returns per unit of risk. Nova Fund Class is currently generating about -0.04 per unit of risk. If you would invest  1,961  in Inverse Sp 500 on November 27, 2024 and sell it today you would earn a total of  8.00  from holding Inverse Sp 500 or generate 0.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Inverse Sp 500  vs.  Nova Fund Class

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -1012345
JavaScript chart by amCharts 3.21.15RYARX RYNHX
       Timeline  
Inverse Sp 500 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Sp 500 are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Inverse Sp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb19.219.419.619.82020.2
Nova Fund Class 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Nova Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Nova Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb130132134136138140

Inverse Sp and Nova Fund Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.55-1.91-1.27-0.630.010.631.281.922.57 0.10.20.30.40.50.6
JavaScript chart by amCharts 3.21.15RYARX RYNHX
       Returns  

Pair Trading with Inverse Sp and Nova Fund

The main advantage of trading using opposite Inverse Sp and Nova Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Sp position performs unexpectedly, Nova 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 Nova Fund will offset losses from the drop in Nova Fund's long position.
The idea behind Inverse Sp 500 and Nova Fund Class 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.
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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