Correlation Between NH Investment and Company K

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

Diversification Opportunities for NH Investment and Company K

-0.01

Correlation Coefficient

NH Investment  Company K

Good diversification

The 3 months correlation between 005940 and Company is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding NH Investment Securities and Company K Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Company K Partners 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 Company K. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Company K Partners has no effect on the direction of NH Investment i.e., NH Investment and Company K go up and down completely randomly.

Pair Corralation between NH Investment and Company K

Assuming the 90 days trading horizon NH Investment Securities is expected to under-perform the Company K. But the stock apears to be less risky and, when comparing its historical volatility, NH Investment Securities is 2.21 times less risky than Company K. The stock trades about -0.12 of its potential returns per unit of risk. The Company K Partners is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  510,000  in Company K Partners on October 4, 2024 and sell it today you would lose (12,500) from holding Company K Partners or give up 2.45% of portfolio value over 90 days.

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

NH Investment Securities  vs.  Company K Partners

NH Investment Securities

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NH Investment Securities are ranked lower than 1 (%) 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.

Company K Partners

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Company K Partners are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Company K 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 Company K

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

The idea behind NH Investment Securities and Company K Partners 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.

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 the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.