Correlation Between NAU IB and SV Investment

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

Diversification Opportunities for NAU IB and SV Investment

0.35

Correlation Coefficient

NAU IB  SV Investment

Weak diversification

The 3 months correlation between NAU and 289080 is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding NAU IB Capital and SV Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SV Investment 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 SV Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SV Investment has no effect on the direction of NAU IB i.e., NAU IB and SV Investment go up and down completely randomly.

Pair Corralation between NAU IB and SV Investment

Assuming the 90 days trading horizon NAU IB Capital is expected to under-perform the SV Investment. In addition to that, NAU IB is 3.11 times more volatile than SV Investment. It trades about -0.01 of its total potential returns per unit of risk. SV Investment is currently generating about 0.01 per unit of volatility. If you would invest  130,321  in SV Investment on December 30, 2024 and sell it today you would earn a total of  579.00  from holding SV Investment or generate 0.44% return on investment over 90 days.

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

NAU IB Capital  vs.  SV Investment

NAU IB Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days NAU IB Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NAU IB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SV Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SV Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SV Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NAU IB and SV Investment

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

The idea behind NAU IB Capital and SV Investment 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.