Correlation Between AIXTRON SE and Nova

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

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

Diversification Opportunities for AIXTRON SE and Nova

0.6

Correlation Coefficient

AIXTRON SE  Nova

Poor diversification

The 3 months correlation between AIXTRON and Nova is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding AIXTRON SE and Nova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova and AIXTRON SE 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 AIXTRON SE are associated (or correlated) with Nova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova has no effect on the direction of AIXTRON SE i.e., AIXTRON SE and Nova go up and down completely randomly.

Pair Corralation between AIXTRON SE and Nova

Assuming the 90 days horizon AIXTRON SE is expected to under-perform the Nova. But the pink sheet apears to be less risky and, when comparing its historical volatility, AIXTRON SE is 1.22 times less risky than Nova. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Nova is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  18,927  in Nova on September 14, 2024 and sell it today you would earn a total of  28.00  from holding Nova or generate 0.15% return on investment over 90 days.

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

AIXTRON SE  vs.  Nova

AIXTRON SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIXTRON SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Nova

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nova are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, Nova is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with AIXTRON SE and Nova

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

The idea behind AIXTRON SE and Nova 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.