Correlation Between Air Link and National Refinery

Can any of the company-specific risk be diversified away by investing in both Air Link and National Refinery 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 National Refinery 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 National Refinery, you can compare the effects of market volatilities on Air Link and National Refinery 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 National Refinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Link and National Refinery.

Diversification Opportunities for Air Link and National Refinery

0.68

Correlation Coefficient

Air Link  National Refinery

Poor diversification

The 3 months correlation between Air and National is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Air Link Communication and National Refinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Refinery 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 National Refinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Refinery has no effect on the direction of Air Link i.e., Air Link and National Refinery go up and down completely randomly.

Pair Corralation between Air Link and National Refinery

Assuming the 90 days trading horizon Air Link Communication is expected to generate 1.01 times more return on investment than National Refinery. However, Air Link is 1.01 times more volatile than National Refinery. It trades about 0.03 of its potential returns per unit of risk. National Refinery is currently generating about -0.05 per unit of risk. If you would invest  16,865  in Air Link Communication on December 4, 2024 and sell it today you would earn a total of  563.00  from holding Air Link Communication or generate 3.34% 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.  National Refinery

Air Link Communication

Risk-Adjusted Performance

Weak

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

National Refinery

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Refinery has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Air Link and National Refinery

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

The idea behind Air Link Communication and National Refinery 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.