Correlation Between V and NOHO

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

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

Diversification Opportunities for V and NOHO

0.0

Correlation Coefficient

V  NOHO

Pay attention - limited upside

The 3 months correlation between V and NOHO is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding V Group and NOHO Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOHO Inc and V 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 V Group are associated (or correlated) with NOHO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOHO Inc has no effect on the direction of V i.e., V and NOHO go up and down completely randomly.

Pair Corralation between V and NOHO

Given the investment horizon of 90 days V is expected to generate 2.63 times less return on investment than NOHO. But when comparing it to its historical volatility, V Group is 1.53 times less risky than NOHO. It trades about 0.08 of its potential returns per unit of risk. NOHO Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.01  in NOHO Inc on September 12, 2024 and sell it today you would earn a total of  0.01  from holding NOHO Inc or generate 100.0% return on investment over 90 days.

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

V Group  vs.  NOHO Inc

V Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days V Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, V is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

NOHO Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NOHO Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, NOHO disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with V and NOHO

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

The idea behind V Group and NOHO Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.