Correlation Between Industrial and NBTM New

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

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

Diversification Opportunities for Industrial and NBTM New

-0.43

Correlation Coefficient

Industrial  NBTM New

Very good diversification

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

Pair Corralation between Industrial and NBTM New

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.41 times more return on investment than NBTM New. However, Industrial and Commercial is 2.44 times less risky than NBTM New. It trades about 0.12 of its potential returns per unit of risk. NBTM New Materials is currently generating about -0.04 per unit of risk. If you would invest  612.00  in Industrial and Commercial on October 6, 2024 and sell it today you would earn a total of  59.00  from holding Industrial and Commercial or generate 9.64% return on investment over 90 days.

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

Industrial and Commercial  vs.  NBTM New Materials

Industrial and Commercial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with Industrial and NBTM New

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

The idea behind Industrial and Commercial and NBTM New Materials 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.