Correlation Between Tenax Therapeutics and NovaBay Pharmaceuticals

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

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

Diversification Opportunities for Tenax Therapeutics and NovaBay Pharmaceuticals

0.21

Correlation Coefficient

Tenax Therapeutics  NovaBay Pharmaceuticals

Modest diversification

The 3 months correlation between Tenax and NovaBay is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Tenax Therapeutics and NovaBay Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaBay Pharmaceuticals and Tenax Therapeutics 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 Tenax Therapeutics are associated (or correlated) with NovaBay Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NovaBay Pharmaceuticals has no effect on the direction of Tenax Therapeutics i.e., Tenax Therapeutics and NovaBay Pharmaceuticals go up and down completely randomly.

Pair Corralation between Tenax Therapeutics and NovaBay Pharmaceuticals

Given the investment horizon of 90 days Tenax Therapeutics is expected to generate 1.05 times less return on investment than NovaBay Pharmaceuticals. But when comparing it to its historical volatility, Tenax Therapeutics is 2.31 times less risky than NovaBay Pharmaceuticals. It trades about 0.17 of its potential returns per unit of risk. NovaBay Pharmaceuticals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  48.00  in NovaBay Pharmaceuticals on September 2, 2024 and sell it today you would earn a total of  12.00  from holding NovaBay Pharmaceuticals or generate 25.0% return on investment over 90 days.

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

Tenax Therapeutics  vs.  NovaBay Pharmaceuticals

Tenax Therapeutics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tenax Therapeutics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Tenax Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

NovaBay Pharmaceuticals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NovaBay Pharmaceuticals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, NovaBay Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tenax Therapeutics and NovaBay Pharmaceuticals

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

The idea behind Tenax Therapeutics and NovaBay Pharmaceuticals 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.