Correlation Between Nova Fund and Basic Materials
Can any of the company-specific risk be diversified away by investing in both Nova Fund and Basic Materials 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 Basic Materials 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 Basic Materials Fund, you can compare the effects of market volatilities on Nova Fund and Basic Materials 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 Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Fund and Basic Materials.
Diversification Opportunities for Nova Fund and Basic Materials
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nova and Basic is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nova Fund Class and Basic Materials Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials 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 Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials has no effect on the direction of Nova Fund i.e., Nova Fund and Basic Materials go up and down completely randomly.
Pair Corralation between Nova Fund and Basic Materials
Assuming the 90 days horizon Nova Fund Class is expected to generate 1.2 times more return on investment than Basic Materials. However, Nova Fund is 1.2 times more volatile than Basic Materials Fund. It trades about 0.19 of its potential returns per unit of risk. Basic Materials Fund is currently generating about 0.13 per unit of risk. If you would invest 12,098 in Nova Fund Class on September 4, 2024 and sell it today you would earn a total of 1,674 from holding Nova Fund Class or generate 13.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nova Fund Class vs. Basic Materials Fund
Performance |
| Timeline |
| Nova Fund Class |
| Basic Materials |
Nova Fund and Basic Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nova Fund and Basic Materials
The main advantage of trading using opposite Nova Fund and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nova Fund position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.| Nova Fund vs. Basic Materials Fund | Nova Fund vs. Basic Materials Fund | Nova Fund vs. Banking Fund Class | Nova Fund vs. Basic Materials Fund |
| Basic Materials vs. Basic Materials Fund | Basic Materials vs. Energy Services Fund | Basic Materials vs. Energy Fund Class | Basic Materials vs. Basic Materials Fund |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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