Correlation Between Nova Technology and Acter

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

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

Diversification Opportunities for Nova Technology and Acter

0.62

Correlation Coefficient

Nova Technology  Acter

Poor diversification

The 3 months correlation between Nova and Acter is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nova Technology and Acter Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acter and Nova Technology 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 Technology are associated (or correlated) with Acter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acter has no effect on the direction of Nova Technology i.e., Nova Technology and Acter go up and down completely randomly.

Pair Corralation between Nova Technology and Acter

Assuming the 90 days trading horizon Nova Technology is expected to generate 1.39 times less return on investment than Acter. But when comparing it to its historical volatility, Nova Technology is 1.06 times less risky than Acter. It trades about 0.11 of its potential returns per unit of risk. Acter Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  9,395  in Acter Co on September 2, 2024 and sell it today you would earn a total of  21,955  from holding Acter Co or generate 233.69% return on investment over 90 days.

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

Nova Technology  vs.  Acter Co

Nova Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nova Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Acter

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Acter Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Acter showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nova Technology and Acter

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

The idea behind Nova Technology and Acter Co 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.