Correlation Between Nova Eye and Lendlease

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

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

Diversification Opportunities for Nova Eye and Lendlease

0.3

Correlation Coefficient

Nova Eye  Lendlease

Weak diversification

The 3 months correlation between Nova and Lendlease is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Nova Eye Medical and Lendlease Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lendlease Group and Nova Eye 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 Eye Medical are associated (or correlated) with Lendlease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lendlease Group has no effect on the direction of Nova Eye i.e., Nova Eye and Lendlease go up and down completely randomly.

Pair Corralation between Nova Eye and Lendlease

Assuming the 90 days trading horizon Nova Eye Medical is expected to under-perform the Lendlease. In addition to that, Nova Eye is 3.78 times more volatile than Lendlease Group. It trades about -0.06 of its total potential returns per unit of risk. Lendlease Group is currently generating about 0.08 per unit of volatility. If you would invest  671.00  in Lendlease Group on September 2, 2024 and sell it today you would earn a total of  45.00  from holding Lendlease Group or generate 6.71% return on investment over 90 days.

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

Nova Eye Medical  vs.  Lendlease Group

Nova Eye Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nova Eye Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lendlease Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lendlease Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Lendlease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nova Eye and Lendlease

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

The idea behind Nova Eye Medical and Lendlease Group 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.