Correlation Between Nova Fund and Blue Chip

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Can any of the company-specific risk be diversified away by investing in both Nova Fund and Blue Chip 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 Blue Chip 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 Blue Chip Fund, you can compare the effects of market volatilities on Nova Fund and Blue Chip 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 Blue Chip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Fund and Blue Chip.

Diversification Opportunities for Nova Fund and Blue Chip

0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Nova and Blue is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding NOVA FUND CLASS and BLUE CHIP FUND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Chip Fund 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 Blue Chip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Chip Fund has no effect on the direction of Nova Fund i.e., Nova Fund and Blue Chip go up and down completely randomly.

Pair Corralation between Nova Fund and Blue Chip

Assuming the 90 days horizon Nova Fund Class is expected to generate 1.36 times more return on investment than Blue Chip. However, Nova Fund is 1.36 times more volatile than Blue Chip Fund. It trades about 0.25 of its potential returns per unit of risk. Blue Chip Fund is currently generating about 0.18 per unit of risk. If you would invest  10,827  in Nova Fund Class on December 29, 2023 and sell it today you would earn a total of  546.00  from holding Nova Fund Class or generate 5.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

NOVA FUND CLASS  vs.  BLUE CHIP FUND

 Performance 
       Timeline  
Nova Fund Class 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Nova Fund Class are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nova Fund showed solid returns over the last few months and may actually be approaching a breakup point.
Blue Chip Fund 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Blue Chip Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Blue Chip may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Nova Fund and Blue Chip Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nova Fund and Blue Chip

The main advantage of trading using opposite Nova Fund and Blue Chip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nova Fund position performs unexpectedly, Blue Chip 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 Blue Chip will offset losses from the drop in Blue Chip's long position.
The idea behind Nova Fund Class and Blue Chip Fund 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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