Correlation Between SBI Investment and NAU IB

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

By analyzing existing cross correlation between SBI Investment KOREA and NAU IB Capital, you can compare the effects of market volatilities on SBI Investment and NAU IB 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 SBI Investment with a short position of NAU IB. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBI Investment and NAU IB.

Diversification Opportunities for SBI Investment and NAU IB

0.64

Correlation Coefficient

SBI Investment  NAU IB

Poor diversification

The 3 months correlation between SBI and NAU is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding SBI Investment KOREA and NAU IB Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAU IB Capital and SBI 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 SBI Investment KOREA are associated (or correlated) with NAU IB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAU IB Capital has no effect on the direction of SBI Investment i.e., SBI Investment and NAU IB go up and down completely randomly.

Pair Corralation between SBI Investment and NAU IB

Assuming the 90 days trading horizon SBI Investment is expected to generate 2.31 times less return on investment than NAU IB. But when comparing it to its historical volatility, SBI Investment KOREA is 1.76 times less risky than NAU IB. It trades about 0.11 of its potential returns per unit of risk. NAU IB Capital is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  95,210  in NAU IB Capital on October 6, 2024 and sell it today you would earn a total of  39,790  from holding NAU IB Capital or generate 41.79% return on investment over 90 days.

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

SBI Investment KOREA  vs.  NAU IB Capital

SBI Investment KOREA

Risk-Adjusted Performance

5 of 100

Modest

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

NAU IB Capital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NAU IB Capital are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NAU IB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBI Investment and NAU IB

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

The idea behind SBI Investment KOREA and NAU IB Capital 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.