Correlation Between Solana and Nova Technology

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

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

Diversification Opportunities for Solana and Nova Technology

0.03

Correlation Coefficient

Solana  Nova Technology

Significant diversification

The 3 months correlation between Solana and Nova is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Solana and Nova Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Technology and Solana 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 Solana are associated (or correlated) with Nova Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Technology has no effect on the direction of Solana i.e., Solana and Nova Technology go up and down completely randomly.

Pair Corralation between Solana and Nova Technology

Assuming the 90 days trading horizon Solana is expected to generate 1.63 times more return on investment than Nova Technology. However, Solana is 1.63 times more volatile than Nova Technology. It trades about 0.2 of its potential returns per unit of risk. Nova Technology is currently generating about 0.13 per unit of risk. If you would invest  13,800  in Solana on June 30, 2024 and sell it today you would earn a total of  2,016  from holding Solana or generate 14.61% return on investment over 90 days.

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

Solana  vs.  Nova Technology

Solana

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solana are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Solana may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Nova Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nova Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in October 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Solana and Nova Technology

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

The idea behind Solana and Nova Technology 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.