Correlation Between Novanta and MicroSectorsTM Oil

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

Diversification Opportunities for Novanta and MicroSectorsTM Oil

-0.73
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Novanta and MicroSectorsTM is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Novanta and MicroSectorsTM Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectorsTM Oil Gas and Novanta 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 Novanta are associated (or correlated) with MicroSectorsTM Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectorsTM Oil Gas has no effect on the direction of Novanta i.e., Novanta and MicroSectorsTM Oil go up and down completely randomly.

Pair Corralation between Novanta and MicroSectorsTM Oil

Given the investment horizon of 90 days Novanta is expected to generate 0.44 times more return on investment than MicroSectorsTM Oil. However, Novanta is 2.28 times less risky than MicroSectorsTM Oil. It trades about 0.03 of its potential returns per unit of risk. MicroSectorsTM Oil Gas is currently generating about -0.03 per unit of risk. If you would invest  13,325  in Novanta on December 29, 2023 and sell it today you would earn a total of  4,055  from holding Novanta or generate 30.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy99.8%
ValuesDaily Returns

Novanta  vs.  MicroSectorsTM Oil Gas

 Performance 
       Timeline  
Novanta 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Novanta are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Novanta is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
MicroSectorsTM Oil Gas 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days MicroSectorsTM Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's essential indicators remain rather sound which may send shares a bit higher in April 2024. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Novanta and MicroSectorsTM Oil Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Novanta and MicroSectorsTM Oil

The main advantage of trading using opposite Novanta and MicroSectorsTM Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novanta position performs unexpectedly, MicroSectorsTM Oil 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 MicroSectorsTM Oil will offset losses from the drop in MicroSectorsTM Oil's long position.
The idea behind Novanta and MicroSectorsTM Oil Gas 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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