Correlation Between Federal Corp and Nak Sealing

Can any of the company-specific risk be diversified away by investing in both Federal Corp and Nak Sealing 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 Federal Corp and Nak Sealing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Federal Corp and Nak Sealing Technologies, you can compare the effects of market volatilities on Federal Corp and Nak Sealing 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 Federal Corp with a short position of Nak Sealing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Corp and Nak Sealing.

Diversification Opportunities for Federal Corp and Nak Sealing

0.5

Correlation Coefficient

Federal Corp  Nak Sealing

Very weak diversification

The 3 months correlation between Federal and Nak is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Federal Corp and Nak Sealing Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nak Sealing Technologies and Federal Corp 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 Federal Corp are associated (or correlated) with Nak Sealing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nak Sealing Technologies has no effect on the direction of Federal Corp i.e., Federal Corp and Nak Sealing go up and down completely randomly.

Pair Corralation between Federal Corp and Nak Sealing

Assuming the 90 days trading horizon Federal Corp is expected to under-perform the Nak Sealing. In addition to that, Federal Corp is 1.02 times more volatile than Nak Sealing Technologies. It trades about -0.18 of its total potential returns per unit of risk. Nak Sealing Technologies is currently generating about 0.0 per unit of volatility. If you would invest  11,400  in Nak Sealing Technologies on October 3, 2024 and sell it today you would lose (50.00) from holding Nak Sealing Technologies or give up 0.44% of portfolio value over 90 days.

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

Federal Corp  vs.  Nak Sealing Technologies

Federal Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federal Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Nak Sealing Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nak Sealing Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Nak Sealing is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Federal Corp and Nak Sealing

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

The idea behind Federal Corp and Nak Sealing Technologies 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.