Correlation Between Cultural Investment and North Chemical

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

By analyzing existing cross correlation between Cultural Investment Holdings and North Chemical Industries, you can compare the effects of market volatilities on Cultural Investment and North 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 Cultural Investment with a short position of North Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cultural Investment and North Chemical.

Diversification Opportunities for Cultural Investment and North Chemical

0.43

Correlation Coefficient

Cultural Investment  North Chemical

Very weak diversification

The 3 months correlation between Cultural and North is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Cultural Investment Holdings and North Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Chemical Industries and Cultural Investment 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 Cultural Investment Holdings are associated (or correlated) with North Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Chemical Industries has no effect on the direction of Cultural Investment i.e., Cultural Investment and North Chemical go up and down completely randomly.

Pair Corralation between Cultural Investment and North Chemical

Assuming the 90 days trading horizon Cultural Investment Holdings is expected to under-perform the North Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Cultural Investment Holdings is 1.35 times less risky than North Chemical. The stock trades about -0.01 of its potential returns per unit of risk. The North Chemical Industries is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,072  in North Chemical Industries on December 26, 2024 and sell it today you would earn a total of  15.00  from holding North Chemical Industries or generate 1.4% return on investment over 90 days.

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

Cultural Investment Holdings  vs.  North Chemical Industries

Cultural Investment

Risk-Adjusted Performance

Very Weak

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

North Chemical Industries

Risk-Adjusted Performance

Weak

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

Pair Trading with Cultural Investment and North Chemical

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

The idea behind Cultural Investment Holdings and North Chemical Industries 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.