Correlation Between NAT ABSOLUTE and Fine Metal

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

By analyzing existing cross correlation between NAT ABSOLUTE TECHNOLOGIES and Fine Metal Technologies, you can compare the effects of market volatilities on NAT ABSOLUTE and Fine Metal 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 NAT ABSOLUTE with a short position of Fine Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of NAT ABSOLUTE and Fine Metal.

Diversification Opportunities for NAT ABSOLUTE and Fine Metal

0.65

Correlation Coefficient

NAT ABSOLUTE  Fine Metal

Poor diversification

The 3 months correlation between NAT and Fine is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding NAT ABSOLUTE TECHNOLOGIES and Fine Metal Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fine Metal Technologies and NAT ABSOLUTE 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 NAT ABSOLUTE TECHNOLOGIES are associated (or correlated) with Fine Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fine Metal Technologies has no effect on the direction of NAT ABSOLUTE i.e., NAT ABSOLUTE and Fine Metal go up and down completely randomly.

Pair Corralation between NAT ABSOLUTE and Fine Metal

Assuming the 90 days trading horizon NAT ABSOLUTE TECHNOLOGIES is expected to under-perform the Fine Metal. But the stock apears to be less risky and, when comparing its historical volatility, NAT ABSOLUTE TECHNOLOGIES is 1.52 times less risky than Fine Metal. The stock trades about -0.17 of its potential returns per unit of risk. The Fine Metal Technologies is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,400  in Fine Metal Technologies on October 6, 2024 and sell it today you would lose (50.00) from holding Fine Metal Technologies or give up 1.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.56%
Values	Daily Returns

NAT ABSOLUTE TECHNOLOGIES  vs.  Fine Metal Technologies

NAT ABSOLUTE TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NAT ABSOLUTE TECHNOLOGIES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Fine Metal Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fine Metal Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Fine Metal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with NAT ABSOLUTE and Fine Metal

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

The idea behind NAT ABSOLUTE TECHNOLOGIES and Fine Metal Technologies 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.