Correlation Between North American and INTEL CDR

Can any of the company-specific risk be diversified away by investing in both North American and INTEL CDR 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 North American and INTEL CDR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between North American Financial and INTEL CDR, you can compare the effects of market volatilities on North American and INTEL CDR 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 North American with a short position of INTEL CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and INTEL CDR.

Diversification Opportunities for North American and INTEL CDR

-0.31

Correlation Coefficient

North American  INTEL CDR

Very good diversification

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

Pair Corralation between North American and INTEL CDR

Assuming the 90 days trading horizon North American Financial is expected to under-perform the INTEL CDR. But the stock apears to be less risky and, when comparing its historical volatility, North American Financial is 2.15 times less risky than INTEL CDR. The stock trades about -0.07 of its potential returns per unit of risk. The INTEL CDR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,164  in INTEL CDR on December 30, 2024 and sell it today you would earn a total of  159.00  from holding INTEL CDR or generate 13.66% return on investment over 90 days.

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

North American Financial  vs.  INTEL CDR

North American Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days North American Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

INTEL CDR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INTEL CDR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, INTEL CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with North American and INTEL CDR

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

The idea behind North American Financial and INTEL CDR 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 CEOs Directory module to screen CEOs from public companies around the world.