Correlation Between Novacyt SA and Nihon Kohden

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

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

Diversification Opportunities for Novacyt SA and Nihon Kohden

0.18

Correlation Coefficient

Novacyt SA  Nihon Kohden

Average diversification

The 3 months correlation between Novacyt and Nihon is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Novacyt SA and Nihon Kohden Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nihon Kohden Corp and Novacyt SA 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 Novacyt SA are associated (or correlated) with Nihon Kohden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nihon Kohden Corp has no effect on the direction of Novacyt SA i.e., Novacyt SA and Nihon Kohden go up and down completely randomly.

Pair Corralation between Novacyt SA and Nihon Kohden

Assuming the 90 days horizon Novacyt SA is expected to under-perform the Nihon Kohden. But the pink sheet apears to be less risky and, when comparing its historical volatility, Novacyt SA is 1.05 times less risky than Nihon Kohden. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Nihon Kohden Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,456  in Nihon Kohden Corp on September 21, 2024 and sell it today you would earn a total of  59.00  from holding Nihon Kohden Corp or generate 4.05% return on investment over 90 days.

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

Novacyt SA  vs.  Nihon Kohden Corp

Novacyt SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novacyt SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Nihon Kohden Corp

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nihon Kohden Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady forward-looking signals, Nihon Kohden may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Novacyt SA and Nihon Kohden

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

The idea behind Novacyt SA and Nihon Kohden Corp 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.