Correlation Between Basic Materials and Nova Fund
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Nova Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials Fund and Nova Fund Investor, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Nova Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Nova Fund.
Diversification Opportunities for Basic Materials and Nova Fund
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Basic and Nova is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials Fund and Nova Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Fund Investor and Basic Materials 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 Basic Materials Fund 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 Investor has no effect on the direction of Basic Materials i.e., Basic Materials and Nova Fund go up and down completely randomly.
Pair Corralation between Basic Materials and Nova Fund
Assuming the 90 days horizon Basic Materials is expected to generate 21.89 times less return on investment than Nova Fund. But when comparing it to its historical volatility, Basic Materials Fund is 1.44 times less risky than Nova Fund. It trades about 0.01 of its potential returns per unit of risk. Nova Fund Investor is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 14,683 in Nova Fund Investor on August 27, 2024 and sell it today you would earn a total of 594.00 from holding Nova Fund Investor or generate 4.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Basic Materials Fund vs. Nova Fund Investor
Performance |
| Timeline |
| Basic Materials |
| Nova Fund Investor |
Basic Materials and Nova Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Basic Materials and Nova Fund
The main advantage of trading using opposite Basic Materials and Nova Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.| Basic Materials vs. Basic Materials Fund | Basic Materials vs. Basic Materials Fund | Basic Materials vs. Basic Materials Fund | Basic Materials vs. Energy Services Fund |
| Nova Fund vs. Ancorathelen Small Mid Cap | Nova Fund vs. Massmutual Select Small | Nova Fund vs. Kinetics Small Cap | Nova Fund vs. Victory Integrity Small Cap |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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