Correlation Between Nova Leap and Sabio Holdings

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

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

Diversification Opportunities for Nova Leap and Sabio Holdings

-0.16

Correlation Coefficient

Nova Leap  Sabio Holdings

Good diversification

The 3 months correlation between Nova and Sabio is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Nova Leap Health and Sabio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabio Holdings and Nova Leap 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 Leap Health are associated (or correlated) with Sabio Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabio Holdings has no effect on the direction of Nova Leap i.e., Nova Leap and Sabio Holdings go up and down completely randomly.

Pair Corralation between Nova Leap and Sabio Holdings

Assuming the 90 days horizon Nova Leap Health is expected to generate 1.74 times more return on investment than Sabio Holdings. However, Nova Leap is 1.74 times more volatile than Sabio Holdings. It trades about 0.14 of its potential returns per unit of risk. Sabio Holdings is currently generating about 0.13 per unit of risk. If you would invest  25.00  in Nova Leap Health on September 27, 2024 and sell it today you would earn a total of  3.00  from holding Nova Leap Health or generate 12.0% return on investment over 90 days.

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

Nova Leap Health  vs.  Sabio Holdings

Nova Leap Health

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Leap Health are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Nova Leap showed solid returns over the last few months and may actually be approaching a breakup point.

Sabio Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sabio Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal forward indicators, Sabio Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nova Leap and Sabio Holdings

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

The idea behind Nova Leap Health and Sabio Holdings 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .