Correlation Between NAU IB and Design

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

Diversification Opportunities for NAU IB and Design

-0.7

Correlation Coefficient

NAU IB  Design

Excellent diversification

The 3 months correlation between NAU and Design is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding NAU IB Capital and Design Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Design 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 Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Design has no effect on the direction of NAU IB i.e., NAU IB and Design go up and down completely randomly.

Pair Corralation between NAU IB and Design

Assuming the 90 days trading horizon NAU IB Capital is expected to generate 0.49 times more return on investment than Design. However, NAU IB Capital is 2.06 times less risky than Design. It trades about 0.04 of its potential returns per unit of risk. Design Co is currently generating about -0.03 per unit of risk. If you would invest  102,988  in NAU IB Capital on October 4, 2024 and sell it today you would earn a total of  13,112  from holding NAU IB Capital or generate 12.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.16%
Values	Daily Returns

NAU IB Capital  vs.  Design Co

NAU IB Capital

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NAU IB Capital are ranked lower than 6 (%) 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.

Design

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Design 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 Design

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

The idea behind NAU IB Capital and Design 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.