Correlation Between Computer Age and N B

Can any of the company-specific risk be diversified away by investing in both Computer Age and N B 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 Computer Age and N B into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Computer Age Management and N B I, you can compare the effects of market volatilities on Computer Age and N B 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 Computer Age with a short position of N B. Check out your portfolio center. Please also check ongoing floating volatility patterns of Computer Age and N B.

Diversification Opportunities for Computer Age and N B

0.85

Correlation Coefficient

Computer Age  N B

Very poor diversification

The 3 months correlation between Computer and NBIFIN is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Computer Age Management and N B I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on N B I and Computer Age 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 Computer Age Management are associated (or correlated) with N B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of N B I has no effect on the direction of Computer Age i.e., Computer Age and N B go up and down completely randomly.

Pair Corralation between Computer Age and N B

Assuming the 90 days trading horizon Computer Age is expected to generate 8.43 times less return on investment than N B. But when comparing it to its historical volatility, Computer Age Management is 1.49 times less risky than N B. It trades about 0.02 of its potential returns per unit of risk. N B I is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  239,655  in N B I on October 12, 2024 and sell it today you would earn a total of  60,325  from holding N B I or generate 25.17% return on investment over 90 days.

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

Computer Age Management  vs.  N B I

Computer Age Management

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Computer Age Management are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Computer Age is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

N B I

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in N B I are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, N B sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Computer Age and N B

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

The idea behind Computer Age Management and N B I 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.