Correlation Between Novavis Group and Echo Investment

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

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

Diversification Opportunities for Novavis Group and Echo Investment

-0.72

Correlation Coefficient

Novavis Group  Echo Investment

Pay attention - limited upside

The 3 months correlation between Novavis and Echo is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Novavis Group SA and Echo Investment SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Echo Investment SA and Novavis Group 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 Novavis Group SA are associated (or correlated) with Echo Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Echo Investment SA has no effect on the direction of Novavis Group i.e., Novavis Group and Echo Investment go up and down completely randomly.

Pair Corralation between Novavis Group and Echo Investment

Assuming the 90 days trading horizon Novavis Group SA is expected to under-perform the Echo Investment. But the stock apears to be less risky and, when comparing its historical volatility, Novavis Group SA is 1.05 times less risky than Echo Investment. The stock trades about -0.21 of its potential returns per unit of risk. The Echo Investment SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  417.00  in Echo Investment SA on September 12, 2024 and sell it today you would earn a total of  50.00  from holding Echo Investment SA or generate 11.99% return on investment over 90 days.

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

Novavis Group SA  vs.  Echo Investment SA

Novavis Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novavis Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Echo Investment SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Echo Investment SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Echo Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novavis Group and Echo Investment

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

The idea behind Novavis Group SA and Echo Investment SA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.