Correlation Between NAT ABSOLUTE and President Automobile

Can any of the company-specific risk be diversified away by investing in both NAT ABSOLUTE and President Automobile 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 President Automobile 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 President Automobile Industries, you can compare the effects of market volatilities on NAT ABSOLUTE and President Automobile 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 President Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of NAT ABSOLUTE and President Automobile.

Diversification Opportunities for NAT ABSOLUTE and President Automobile

0.86

Correlation Coefficient

NAT ABSOLUTE  President Automobile

Very poor diversification

The 3 months correlation between NAT and President is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding NAT ABSOLUTE TECHNOLOGIES and President Automobile Industrie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on President Automobile 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 President Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of President Automobile has no effect on the direction of NAT ABSOLUTE i.e., NAT ABSOLUTE and President Automobile go up and down completely randomly.

Pair Corralation between NAT ABSOLUTE and President Automobile

Assuming the 90 days trading horizon NAT ABSOLUTE TECHNOLOGIES is expected to under-perform the President Automobile. But the stock apears to be less risky and, when comparing its historical volatility, NAT ABSOLUTE TECHNOLOGIES is 1.23 times less risky than President Automobile. The stock trades about -0.17 of its potential returns per unit of risk. The President Automobile Industries is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  138.00  in President Automobile Industries on October 6, 2024 and sell it today you would earn a total of  9.00  from holding President Automobile Industries or generate 6.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.74%
Values	Daily Returns

NAT ABSOLUTE TECHNOLOGIES  vs.  President Automobile Industrie

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.

President Automobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days President Automobile Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with NAT ABSOLUTE and President Automobile

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

The idea behind NAT ABSOLUTE TECHNOLOGIES and President Automobile Industries 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.