Correlation Between Nova and Trio Tech

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

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

Diversification Opportunities for Nova and Trio Tech

-0.47

Correlation Coefficient

Nova  Trio Tech

Very good diversification

The 3 months correlation between Nova and Trio is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Nova and Trio Tech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trio Tech International and Nova 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 are associated (or correlated) with Trio Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trio Tech International has no effect on the direction of Nova i.e., Nova and Trio Tech go up and down completely randomly.

Pair Corralation between Nova and Trio Tech

Given the investment horizon of 90 days Nova is expected to generate 0.94 times more return on investment than Trio Tech. However, Nova is 1.07 times less risky than Trio Tech. It trades about 0.13 of its potential returns per unit of risk. Trio Tech International is currently generating about -0.32 per unit of risk. If you would invest  19,050  in Nova on October 1, 2024 and sell it today you would earn a total of  955.00  from holding Nova or generate 5.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Nova  vs.  Trio Tech International

Nova

Risk-Adjusted Performance

1 of 100

Very 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.

Trio Tech International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Trio Tech International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Trio Tech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nova and Trio Tech

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

The idea behind Nova and Trio Tech International 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.