Correlation Between ISE Commerce and NAU IB

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

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

Diversification Opportunities for ISE Commerce and NAU IB

-0.23

Correlation Coefficient

ISE Commerce  NAU IB

Very good diversification

The 3 months correlation between ISE and NAU is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding ISE Commerce 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 ISE Commerce 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 ISE Commerce 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 ISE Commerce i.e., ISE Commerce and NAU IB go up and down completely randomly.

Pair Corralation between ISE Commerce and NAU IB

Assuming the 90 days trading horizon ISE Commerce is expected to under-perform the NAU IB. But the stock apears to be less risky and, when comparing its historical volatility, ISE Commerce is 1.23 times less risky than NAU IB. The stock trades about -0.09 of its potential returns per unit of risk. The NAU IB Capital is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  95,210  in NAU IB Capital on October 26, 2024 and sell it today you would earn a total of  18,590  from holding NAU IB Capital or generate 19.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

ISE Commerce  vs.  NAU IB Capital

ISE Commerce

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ISE Commerce has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NAU IB Capital

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NAU IB Capital are ranked lower than 5 (%) 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 ISE Commerce and NAU IB

The main advantage of trading using opposite ISE Commerce and NAU IB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ISE Commerce 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 ISE Commerce 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 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.