Correlation Between Novan and EuroDry

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

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

Diversification Opportunities for Novan and EuroDry

-0.32

Correlation Coefficient

Novan  EuroDry

Very good diversification

The 3 months correlation between Novan and EuroDry is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Novan Inc and EuroDry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EuroDry and Novan 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 Novan Inc are associated (or correlated) with EuroDry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EuroDry has no effect on the direction of Novan i.e., Novan and EuroDry go up and down completely randomly.

Pair Corralation between Novan and EuroDry

If you would invest  3.47  in Novan Inc on January 25, 2024 and sell it today you would earn a total of  0.00  from holding Novan Inc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Novan Inc  vs.  EuroDry

Novan Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novan Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Novan is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

EuroDry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EuroDry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, EuroDry is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Novan and EuroDry

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

The idea behind Novan Inc and EuroDry 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..