Correlation Between NVR and Spark Networks

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

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

Diversification Opportunities for NVR and Spark Networks

-0.66

Correlation Coefficient

NVR  Spark Networks

Excellent diversification

The 3 months correlation between NVR and Spark is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding NVR Inc and Spark Networks SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spark Networks SE and NVR 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 NVR Inc are associated (or correlated) with Spark Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spark Networks SE has no effect on the direction of NVR i.e., NVR and Spark Networks go up and down completely randomly.

Pair Corralation between NVR and Spark Networks

Considering the 90-day investment horizon NVR Inc is expected to generate 0.05 times more return on investment than Spark Networks. However, NVR Inc is 19.0 times less risky than Spark Networks. It trades about 0.18 of its potential returns per unit of risk. Spark Networks SE is currently generating about -0.25 per unit of risk. If you would invest  556,055  in NVR Inc on January 30, 2024 and sell it today you would earn a total of  208,649  from holding NVR Inc or generate 37.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	6.45%
Values	Daily Returns

NVR Inc  vs.  Spark Networks SE

NVR Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVR Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, NVR may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Spark Networks SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spark Networks SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Spark Networks is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with NVR and Spark Networks

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

The idea behind NVR Inc and Spark Networks SE 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.