Correlation Between Sappe Public and Nova Organic

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

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

Diversification Opportunities for Sappe Public and Nova Organic

-0.53

Correlation Coefficient

Sappe Public  Nova Organic

Excellent diversification

The 3 months correlation between Sappe and Nova is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sappe Public and Nova Organic PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Organic PCL and Sappe Public 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 Sappe Public are associated (or correlated) with Nova Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Organic PCL has no effect on the direction of Sappe Public i.e., Sappe Public and Nova Organic go up and down completely randomly.

Pair Corralation between Sappe Public and Nova Organic

Assuming the 90 days trading horizon Sappe Public is expected to under-perform the Nova Organic. But the stock apears to be less risky and, when comparing its historical volatility, Sappe Public is 1.96 times less risky than Nova Organic. The stock trades about -0.25 of its potential returns per unit of risk. The Nova Organic PCL is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  94.00  in Nova Organic PCL on September 24, 2024 and sell it today you would lose (9.00) from holding Nova Organic PCL or give up 9.57% of portfolio value over 90 days.

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

Sappe Public  vs.  Nova Organic PCL

Sappe Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sappe Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Sappe Public is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Nova Organic PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nova Organic PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Sappe Public and Nova Organic

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

The idea behind Sappe Public and Nova Organic PCL 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.