Correlation Between NAU IB and ISU Chemical

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

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

Diversification Opportunities for NAU IB and ISU Chemical

-0.13

Correlation Coefficient

NAU IB  ISU Chemical

Good diversification

The 3 months correlation between NAU and ISU is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding NAU IB Capital and ISU Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISU Chemical and NAU IB 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 NAU IB Capital are associated (or correlated) with ISU Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISU Chemical has no effect on the direction of NAU IB i.e., NAU IB and ISU Chemical go up and down completely randomly.

Pair Corralation between NAU IB and ISU Chemical

Assuming the 90 days trading horizon NAU IB Capital is expected to generate 3.85 times more return on investment than ISU Chemical. However, NAU IB is 3.85 times more volatile than ISU Chemical Co. It trades about 0.26 of its potential returns per unit of risk. ISU Chemical Co is currently generating about 0.26 per unit of risk. If you would invest  89,007  in NAU IB Capital on October 8, 2024 and sell it today you would earn a total of  45,993  from holding NAU IB Capital or generate 51.67% return on investment over 90 days.

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

NAU IB Capital  vs.  ISU Chemical Co

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.

ISU Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ISU Chemical Co 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.

Pair Trading with NAU IB and ISU Chemical

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

The idea behind NAU IB Capital and ISU Chemical 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.