Correlation Between Novan and BANK OF NINGBO

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Can any of the company-specific risk be diversified away by investing in both Novan and BANK OF NINGBO 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 Novan and BANK OF NINGBO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novan Inc and BANK OF NINGBO, you can compare the effects of market volatilities on Novan and BANK OF NINGBO 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 Novan with a short position of BANK OF NINGBO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novan and BANK OF NINGBO.

Diversification Opportunities for Novan and BANK OF NINGBO

-0.26
  Correlation Coefficient

Very good diversification

The 3 months correlation between Novan and 002142 is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Novan Inc and BANK OF NINGBO CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK OF NINGBO and Novan 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 Novan Inc are associated (or correlated) with BANK OF NINGBO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK OF NINGBO has no effect on the direction of Novan i.e., Novan and BANK OF NINGBO go up and down completely randomly.

Pair Corralation between Novan and BANK OF NINGBO

Given the investment horizon of 90 days Novan Inc is expected to generate 1.38 times more return on investment than BANK OF NINGBO. However, Novan is 1.38 times more volatile than BANK OF NINGBO. It trades about 0.23 of its potential returns per unit of risk. BANK OF NINGBO is currently generating about -0.29 per unit of risk. If you would invest  247.00  in Novan Inc on May 12, 2022 and sell it today you would earn a total of  43.00  from holding Novan Inc or generate 17.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy82.61%
ValuesDaily Returns

Novan Inc  vs.  BANK OF NINGBO CO

 Performance (%) 
       Timeline  
Novan Inc 
Novan Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Novan Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Novan disclosed solid returns over the last few months and may actually be approaching a breakup point.

Novan Price Channel

BANK OF NINGBO 
002142 Performance
0 of 100
Over the last 90 days BANK OF NINGBO 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 basic indicators remain somewhat strong which may send shares a bit higher in September 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

002142 Price Channel

Novan and BANK OF NINGBO Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Novan and BANK OF NINGBO

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

Novan Inc

Pair trading matchups for Novan

Walker Dunlop vs. Novan
Alphabet vs. Novan
Salesforce vs. Novan
GM vs. Novan
Dupont Denemours vs. Novan
Bitcoin vs. Novan
SP 500 vs. Novan
Vmware vs. Novan
Bitcoin Invt vs. Novan
Otp Bank vs. Novan
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Novan as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Novan's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Novan's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Novan Inc.
The idea behind Novan Inc and BANK OF NINGBO 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.

BANK OF NINGBO

Pair trading matchups for BANK OF NINGBO

B of A vs. BANK OF NINGBO
Otp Bank vs. BANK OF NINGBO
Visa vs. BANK OF NINGBO
Vmware vs. BANK OF NINGBO
Bitcoin Invt vs. BANK OF NINGBO
Salesforce vs. BANK OF NINGBO
Alphabet vs. BANK OF NINGBO
Walker Dunlop vs. BANK OF NINGBO
Nasdaq QQQ vs. BANK OF NINGBO
GM vs. BANK OF NINGBO
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against BANK OF NINGBO as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. BANK OF NINGBO's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, BANK OF NINGBO's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to BANK OF NINGBO.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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