Correlation Between Garmin and Novanta

Can any of the company-specific risk be diversified away by investing in both Garmin and Novanta 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 Garmin and Novanta into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Garmin and Novanta, you can compare the effects of market volatilities on Garmin and Novanta 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 Garmin with a short position of Novanta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garmin and Novanta.

Diversification Opportunities for Garmin and Novanta

-0.21

Correlation Coefficient

Garmin  Novanta

Very good diversification

The 3 months correlation between Garmin and Novanta is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Garmin and Novanta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novanta and Garmin 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 Garmin are associated (or correlated) with Novanta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novanta has no effect on the direction of Garmin i.e., Garmin and Novanta go up and down completely randomly.

Pair Corralation between Garmin and Novanta

Given the investment horizon of 90 days Garmin is expected to generate 1.3 times more return on investment than Novanta. However, Garmin is 1.3 times more volatile than Novanta. It trades about 0.13 of its potential returns per unit of risk. Novanta is currently generating about -0.02 per unit of risk. If you would invest  14,596  in Garmin on March 11, 2024 and sell it today you would earn a total of  1,730  from holding Garmin or generate 11.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Garmin  vs.  Novanta

Garmin

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Garmin are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Garmin may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Novanta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novanta has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Garmin and Novanta

The main advantage of trading using opposite Garmin and Novanta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garmin position performs unexpectedly, Novanta 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 Novanta will offset losses from the drop in Novanta's long position.

The idea behind Garmin and Novanta 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.