Correlation Between OSE Pharma and Novacyt

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

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

Diversification Opportunities for OSE Pharma and Novacyt

0.01

Correlation Coefficient

OSE Pharma  Novacyt

Significant diversification

The 3 months correlation between OSE and Novacyt is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding OSE Pharma SA and Novacyt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novacyt and OSE Pharma 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 OSE Pharma SA are associated (or correlated) with Novacyt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novacyt has no effect on the direction of OSE Pharma i.e., OSE Pharma and Novacyt go up and down completely randomly.

Pair Corralation between OSE Pharma and Novacyt

Assuming the 90 days trading horizon OSE Pharma SA is expected to under-perform the Novacyt. But the stock apears to be less risky and, when comparing its historical volatility, OSE Pharma SA is 1.38 times less risky than Novacyt. The stock trades about -0.24 of its potential returns per unit of risk. The Novacyt is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  56.00  in Novacyt on September 25, 2024 and sell it today you would earn a total of  3.00  from holding Novacyt or generate 5.36% return on investment over 90 days.

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

OSE Pharma SA  vs.  Novacyt

OSE Pharma SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OSE Pharma SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Novacyt

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novacyt 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.

Pair Trading with OSE Pharma and Novacyt

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

The idea behind OSE Pharma SA and Novacyt 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.