Correlation Between Nova Fund and Japan 2x

Can any of the company-specific risk be diversified away by investing in both Nova Fund and Japan 2x 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 Japan 2x 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 Japan 2x Strategy, you can compare the effects of market volatilities on Nova Fund and Japan 2x 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 Japan 2x. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Fund and Japan 2x.

Diversification Opportunities for Nova Fund and Japan 2x

0.86

Correlation Coefficient

Nova Fund  Japan 2x

Very poor diversification

The 3 months correlation between Nova and Japan is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Nova Fund Class and Japan 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan 2x Strategy 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 Japan 2x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan 2x Strategy has no effect on the direction of Nova Fund i.e., Nova Fund and Japan 2x go up and down completely randomly.

Pair Corralation between Nova Fund and Japan 2x

Assuming the 90 days horizon Nova Fund Class is expected to generate 0.53 times more return on investment than Japan 2x. However, Nova Fund Class is 1.88 times less risky than Japan 2x. It trades about -0.3 of its potential returns per unit of risk. Japan 2x Strategy is currently generating about -0.44 per unit of risk. If you would invest  11,289  in Nova Fund Class on January 20, 2024 and sell it today you would lose (717.00) from holding Nova Fund Class or give up 6.35% of portfolio value over 90 days.

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

Nova Fund Class  vs.  Japan 2x Strategy

Nova Fund Class

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Fund Class are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nova Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Japan 2x Strategy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan 2x Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Japan 2x is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nova Fund and Japan 2x

The main advantage of trading using opposite Nova Fund and Japan 2x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nova Fund position performs unexpectedly, Japan 2x 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 Japan 2x will offset losses from the drop in Japan 2x's long position.

The idea behind Nova Fund Class and Japan 2x Strategy 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.