Correlation Between First State and NEC

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

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

Diversification Opportunities for First State and NEC

-0.6

Correlation Coefficient

First State  NEC

Excellent diversification

The 3 months correlation between First and NEC is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding First State Financial and NEC Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEC Corporation and First State 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 First State Financial are associated (or correlated) with NEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEC Corporation has no effect on the direction of First State i.e., First State and NEC go up and down completely randomly.

Pair Corralation between First State and NEC

If you would invest  8,569  in NEC Corporation on September 16, 2024 and sell it today you would earn a total of  78.00  from holding NEC Corporation or generate 0.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.61%
Values	Daily Returns

First State Financial  vs.  NEC Corp.

First State Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

NEC Corporation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NEC Corporation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, NEC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First State and NEC

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

The idea behind First State Financial and NEC Corporation 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.