Correlation Between Abcellera Biologics and NGK Insulators

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

By analyzing existing cross correlation between Abcellera Biologics and NGK Insulators, you can compare the effects of market volatilities on Abcellera Biologics and NGK Insulators 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 Abcellera Biologics with a short position of NGK Insulators. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abcellera Biologics and NGK Insulators.

Diversification Opportunities for Abcellera Biologics and NGK Insulators

0.43

Correlation Coefficient

Abcellera Biologics  NGK Insulators

Very weak diversification

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

Pair Corralation between Abcellera Biologics and NGK Insulators

Given the investment horizon of 90 days Abcellera Biologics is expected to generate 2.56 times more return on investment than NGK Insulators. However, Abcellera Biologics is 2.56 times more volatile than NGK Insulators. It trades about 0.1 of its potential returns per unit of risk. NGK Insulators is currently generating about 0.01 per unit of risk. If you would invest  265.00  in Abcellera Biologics on September 16, 2024 and sell it today you would earn a total of  16.00  from holding Abcellera Biologics or generate 6.04% return on investment over 90 days.

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

Abcellera Biologics  vs.  NGK Insulators

Abcellera Biologics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Abcellera Biologics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Abcellera Biologics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NGK Insulators

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NGK Insulators are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, NGK Insulators may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Abcellera Biologics and NGK Insulators

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

The idea behind Abcellera Biologics and NGK Insulators 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.