Correlation Between NBTM New and Poly Real

Can any of the company-specific risk be diversified away by investing in both NBTM New and Poly Real 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 NBTM New and Poly Real into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NBTM New Materials and Poly Real Estate, you can compare the effects of market volatilities on NBTM New and Poly Real 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 NBTM New with a short position of Poly Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of NBTM New and Poly Real.

Diversification Opportunities for NBTM New and Poly Real

0.75

Correlation Coefficient

NBTM New  Poly Real

Poor diversification

The 3 months correlation between NBTM and Poly is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding NBTM New Materials and Poly Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Poly Real Estate and NBTM New 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 NBTM New Materials are associated (or correlated) with Poly Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Poly Real Estate has no effect on the direction of NBTM New i.e., NBTM New and Poly Real go up and down completely randomly.

Pair Corralation between NBTM New and Poly Real

Assuming the 90 days trading horizon NBTM New Materials is expected to generate 1.69 times more return on investment than Poly Real. However, NBTM New is 1.69 times more volatile than Poly Real Estate. It trades about -0.14 of its potential returns per unit of risk. Poly Real Estate is currently generating about -0.5 per unit of risk. If you would invest  1,690  in NBTM New Materials on October 5, 2024 and sell it today you would lose (125.00) from holding NBTM New Materials or give up 7.4% of portfolio value over 90 days.

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

NBTM New Materials  vs.  Poly Real Estate

NBTM New Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NBTM New Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Poly Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Poly Real Estate 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 NBTM New and Poly Real

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

The idea behind NBTM New Materials and Poly Real Estate 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.