Correlation Between Loads and National Refinery

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

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

Diversification Opportunities for Loads and National Refinery

-0.35

Correlation Coefficient

Loads  National Refinery

Very good diversification

The 3 months correlation between Loads and National is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Loads and National Refinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Refinery and Loads 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 Loads are associated (or correlated) with National Refinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Refinery has no effect on the direction of Loads i.e., Loads and National Refinery go up and down completely randomly.

Pair Corralation between Loads and National Refinery

Assuming the 90 days trading horizon Loads is expected to generate 1.12 times more return on investment than National Refinery. However, Loads is 1.12 times more volatile than National Refinery. It trades about 0.11 of its potential returns per unit of risk. National Refinery is currently generating about 0.0 per unit of risk. If you would invest  1,426  in Loads on December 2, 2024 and sell it today you would earn a total of  375.00  from holding Loads or generate 26.3% return on investment over 90 days.

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

Loads  vs.  National Refinery

Loads

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Loads are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Loads disclosed solid returns over the last few months and may actually be approaching a breakup point.

National Refinery

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Refinery has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, National Refinery is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Loads and National Refinery

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

The idea behind Loads and National Refinery 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.