Correlation Between Bri-Chem Corp and National Energy

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

Diversification Opportunities for Bri-Chem Corp and National Energy

0.17

Correlation Coefficient

Bri-Chem Corp  National Energy

Average diversification

The 3 months correlation between Bri-Chem and National is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Bri Chem Corp and National Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Energy Services 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 National Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Energy Services has no effect on the direction of Bri-Chem Corp i.e., Bri-Chem Corp and National Energy go up and down completely randomly.

Pair Corralation between Bri-Chem Corp and National Energy

Assuming the 90 days horizon Bri Chem Corp is expected to generate 11.76 times more return on investment than National Energy. However, Bri-Chem Corp is 11.76 times more volatile than National Energy Services. It trades about 0.09 of its potential returns per unit of risk. National Energy Services is currently generating about -0.09 per unit of risk. If you would invest  19.00  in Bri Chem Corp on December 2, 2024 and sell it today you would earn a total of  4.00  from holding Bri Chem Corp or generate 21.05% return on investment over 90 days.

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

Bri Chem Corp  vs.  National Energy Services

Bri Chem Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bri Chem Corp are ranked lower than 7 (%) 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.

National Energy Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating 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 Bri-Chem Corp and National Energy

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

The idea behind Bri Chem Corp and National Energy Services 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.