Correlation Between Strickland Metals and Nova Eye
Can any of the company-specific risk be diversified away by investing in both Strickland Metals and Nova Eye 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 Strickland Metals and Nova Eye into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strickland Metals and Nova Eye Medical, you can compare the effects of market volatilities on Strickland Metals and Nova Eye 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 Strickland Metals with a short position of Nova Eye. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strickland Metals and Nova Eye.
Diversification Opportunities for Strickland Metals and Nova Eye
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Strickland and Nova is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Strickland Metals and Nova Eye Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Eye Medical and Strickland Metals 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 Strickland Metals are associated (or correlated) with Nova Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Eye Medical has no effect on the direction of Strickland Metals i.e., Strickland Metals and Nova Eye go up and down completely randomly.
Pair Corralation between Strickland Metals and Nova Eye
Assuming the 90 days trading horizon Strickland Metals is expected to generate 1.1 times more return on investment than Nova Eye. However, Strickland Metals is 1.1 times more volatile than Nova Eye Medical. It trades about 0.02 of its potential returns per unit of risk. Nova Eye Medical is currently generating about 0.01 per unit of risk. If you would invest 10.00 in Strickland Metals on August 25, 2024 and sell it today you would lose (2.10) from holding Strickland Metals or give up 21.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strickland Metals vs. Nova Eye Medical
Performance |
| Timeline |
| Strickland Metals |
| Nova Eye Medical |
Strickland Metals and Nova Eye Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strickland Metals and Nova Eye
The main advantage of trading using opposite Strickland Metals and Nova Eye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strickland Metals position performs unexpectedly, Nova Eye 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 Eye will offset losses from the drop in Nova Eye's long position.| Strickland Metals vs. Northern Star Resources | Strickland Metals vs. Evolution Mining | Strickland Metals vs. Bluescope Steel | Strickland Metals vs. Sandfire Resources NL |
| Nova Eye vs. Strickland Metals | Nova Eye vs. Sky Metals | Nova Eye vs. Air New Zealand | Nova Eye vs. Home Consortium |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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