Correlation Between NH Investment and Dragonfly

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

Diversification Opportunities for NH Investment and Dragonfly

0.05

Correlation Coefficient

NH Investment  Dragonfly

Significant diversification

The 3 months correlation between 005940 and Dragonfly is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding NH Investment Securities and Dragonfly GF Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dragonfly GF 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 Dragonfly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dragonfly GF has no effect on the direction of NH Investment i.e., NH Investment and Dragonfly go up and down completely randomly.

Pair Corralation between NH Investment and Dragonfly

Assuming the 90 days trading horizon NH Investment is expected to generate 6.03 times less return on investment than Dragonfly. But when comparing it to its historical volatility, NH Investment Securities is 5.41 times less risky than Dragonfly. It trades about 0.06 of its potential returns per unit of risk. Dragonfly GF Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  118,500  in Dragonfly GF Co on October 24, 2024 and sell it today you would earn a total of  14,600  from holding Dragonfly GF Co or generate 12.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	75.41%
Values	Daily Returns

NH Investment Securities  vs.  Dragonfly GF Co

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.

Dragonfly GF

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dragonfly GF Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dragonfly sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NH Investment and Dragonfly

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

The idea behind NH Investment Securities and Dragonfly GF Co 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.