Correlation Between Air Link and Nimir Industrial

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

By analyzing existing cross correlation between Air Link Communication and Nimir Industrial Chemical, you can compare the effects of market volatilities on Air Link and Nimir Industrial 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 Air Link with a short position of Nimir Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Link and Nimir Industrial.

Diversification Opportunities for Air Link and Nimir Industrial

0.71

Correlation Coefficient

Air Link  Nimir Industrial

Poor diversification

The 3 months correlation between Air and Nimir is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Air Link Communication and Nimir Industrial Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nimir Industrial Chemical and Air Link 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 Air Link Communication are associated (or correlated) with Nimir Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nimir Industrial Chemical has no effect on the direction of Air Link i.e., Air Link and Nimir Industrial go up and down completely randomly.

Pair Corralation between Air Link and Nimir Industrial

Assuming the 90 days trading horizon Air Link Communication is expected to generate 1.58 times more return on investment than Nimir Industrial. However, Air Link is 1.58 times more volatile than Nimir Industrial Chemical. It trades about 0.18 of its potential returns per unit of risk. Nimir Industrial Chemical is currently generating about 0.12 per unit of risk. If you would invest  13,221  in Air Link Communication on October 11, 2024 and sell it today you would earn a total of  6,444  from holding Air Link Communication or generate 48.74% return on investment over 90 days.

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

Air Link Communication  vs.  Nimir Industrial Chemical

Air Link Communication

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Link Communication are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Air Link disclosed solid returns over the last few months and may actually be approaching a breakup point.

Nimir Industrial Chemical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nimir Industrial Chemical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Nimir Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Link and Nimir Industrial

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

The idea behind Air Link Communication and Nimir Industrial Chemical 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.