Correlation Between NH Investment and KTB Investment

Can any of the company-specific risk be diversified away by investing in both NH Investment and KTB Investment 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 KTB Investment 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 KTB Investment Securities, you can compare the effects of market volatilities on NH Investment and KTB Investment 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 KTB Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH Investment and KTB Investment.

Diversification Opportunities for NH Investment and KTB Investment

-0.2

Correlation Coefficient

NH Investment  KTB Investment

Good diversification

The 3 months correlation between 005940 and KTB is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding NH Investment Securities and KTB Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KTB Investment Securities 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 KTB Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KTB Investment Securities has no effect on the direction of NH Investment i.e., NH Investment and KTB Investment go up and down completely randomly.

Pair Corralation between NH Investment and KTB Investment

Assuming the 90 days trading horizon NH Investment Securities is expected to generate 0.42 times more return on investment than KTB Investment. However, NH Investment Securities is 2.37 times less risky than KTB Investment. It trades about 0.06 of its potential returns per unit of risk. KTB Investment Securities is currently generating about 0.01 per unit of risk. If you would invest  1,425,000  in NH Investment Securities on December 24, 2024 and sell it today you would earn a total of  60,000  from holding NH Investment Securities or generate 4.21% return on investment over 90 days.

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

NH Investment Securities  vs.  KTB Investment Securities

NH Investment Securities

Risk-Adjusted Performance

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.

KTB Investment Securities

Risk-Adjusted Performance

Very Weak

Over the last 90 days KTB Investment Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KTB Investment 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 KTB Investment

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

The idea behind NH Investment Securities and KTB Investment Securities 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .