Correlation Between Amaero International and NGK Insulators

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

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

Diversification Opportunities for Amaero International and NGK Insulators

-0.43

Correlation Coefficient

Amaero International  NGK Insulators

Very good diversification

The 3 months correlation between Amaero and NGK is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Amaero International and NGK Insulators in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGK Insulators and Amaero International 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 Amaero International 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 Amaero International i.e., Amaero International and NGK Insulators go up and down completely randomly.

Pair Corralation between Amaero International and NGK Insulators

Assuming the 90 days horizon Amaero International is expected to under-perform the NGK Insulators. In addition to that, Amaero International is 1.72 times more volatile than NGK Insulators. It trades about -0.16 of its total potential returns per unit of risk. NGK Insulators is currently generating about 0.11 per unit of volatility. If you would invest  1,153  in NGK Insulators on September 15, 2024 and sell it today you would earn a total of  137.00  from holding NGK Insulators or generate 11.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.38%
Values	Daily Returns

Amaero International  vs.  NGK Insulators

Amaero International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amaero International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 fragile forward indicators, NGK Insulators may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Amaero International and NGK Insulators

The main advantage of trading using opposite Amaero International and NGK Insulators positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amaero International 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 Amaero International 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.