Correlation Between Bri-Chem Corp and NCS Multistage

Can any of the company-specific risk be diversified away by investing in both Bri-Chem Corp and NCS Multistage 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 Bri-Chem Corp and NCS Multistage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bri Chem Corp and NCS Multistage Holdings, you can compare the effects of market volatilities on Bri-Chem Corp and NCS Multistage 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 Bri-Chem Corp with a short position of NCS Multistage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bri-Chem Corp and NCS Multistage.

Diversification Opportunities for Bri-Chem Corp and NCS Multistage

0.31

Correlation Coefficient

Bri-Chem Corp  NCS Multistage

Weak diversification

The 3 months correlation between Bri-Chem and NCS is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Bri Chem Corp and NCS Multistage Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCS Multistage Holdings and Bri-Chem Corp 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 Bri Chem Corp are associated (or correlated) with NCS Multistage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCS Multistage Holdings has no effect on the direction of Bri-Chem Corp i.e., Bri-Chem Corp and NCS Multistage go up and down completely randomly.

Pair Corralation between Bri-Chem Corp and NCS Multistage

Assuming the 90 days horizon Bri Chem Corp is expected to generate 5.82 times more return on investment than NCS Multistage. However, Bri-Chem Corp is 5.82 times more volatile than NCS Multistage Holdings. It trades about 0.16 of its potential returns per unit of risk. NCS Multistage Holdings is currently generating about 0.19 per unit of risk. If you would invest  12.00  in Bri Chem Corp on October 6, 2024 and sell it today you would earn a total of  13.00  from holding Bri Chem Corp or generate 108.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Bri Chem Corp  vs.  NCS Multistage Holdings

Bri Chem Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bri Chem Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Bri-Chem Corp reported solid returns over the last few months and may actually be approaching a breakup point.

NCS Multistage Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NCS Multistage Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, NCS Multistage displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bri-Chem Corp and NCS Multistage

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

The idea behind Bri Chem Corp and NCS Multistage Holdings 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.