Correlation Between Everus Construction and NGK Insulators

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

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

Diversification Opportunities for Everus Construction and NGK Insulators

0.3

Correlation Coefficient

Everus Construction  NGK Insulators

Weak diversification

The 3 months correlation between Everus and NGK is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Everus Construction Group and NGK Insulators in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGK Insulators and Everus Construction 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 Everus Construction Group 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 Everus Construction i.e., Everus Construction and NGK Insulators go up and down completely randomly.

Pair Corralation between Everus Construction and NGK Insulators

Considering the 90-day investment horizon Everus Construction Group is expected to under-perform the NGK Insulators. In addition to that, Everus Construction is 1.79 times more volatile than NGK Insulators. It trades about -0.39 of its total potential returns per unit of risk. NGK Insulators is currently generating about 0.22 per unit of volatility. If you would invest  1,093  in NGK Insulators on December 4, 2024 and sell it today you would earn a total of  168.00  from holding NGK Insulators or generate 15.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Everus Construction Group  vs.  NGK Insulators

Everus Construction

Risk-Adjusted Performance

Very Weak

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

NGK Insulators

Risk-Adjusted Performance

Very Weak

Over the last 90 days NGK Insulators has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, NGK Insulators is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Everus Construction and NGK Insulators

The main advantage of trading using opposite Everus Construction and NGK Insulators positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Everus Construction 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 Everus Construction Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.