Correlation Between NH Investment and DB Financial

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

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

Diversification Opportunities for NH Investment and DB Financial

0.62

Correlation Coefficient

NH Investment  DB Financial

Poor diversification

The 3 months correlation between 005940 and 016610 is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding NH Investment Securities and DB Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Financial Investment and NH Investment 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 NH Investment Securities are associated (or correlated) with DB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Financial Investment has no effect on the direction of NH Investment i.e., NH Investment and DB Financial go up and down completely randomly.

Pair Corralation between NH Investment and DB Financial

Assuming the 90 days trading horizon NH Investment is expected to generate 1.87 times less return on investment than DB Financial. But when comparing it to its historical volatility, NH Investment Securities is 1.55 times less risky than DB Financial. It trades about 0.06 of its potential returns per unit of risk. DB Financial Investment is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  425,500  in DB Financial Investment on September 27, 2024 and sell it today you would earn a total of  114,500  from holding DB Financial Investment or generate 26.91% return on investment over 90 days.

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

NH Investment Securities  vs.  DB Financial Investment

NH Investment Securities

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NH Investment Securities are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NH Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

DB Financial Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DB Financial Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DB Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NH Investment and DB Financial

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

The idea behind NH Investment Securities and DB Financial Investment 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.