Correlation Between National American and Genius

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

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

Diversification Opportunities for National American and Genius

-0.37

Correlation Coefficient

National American  Genius

Very good diversification

The 3 months correlation between National and Genius is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding National American University and Genius Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genius Group and National 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 National American University are associated (or correlated) with Genius. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genius Group has no effect on the direction of National American i.e., National American and Genius go up and down completely randomly.

Pair Corralation between National American and Genius

Given the investment horizon of 90 days National American is expected to generate 3.44 times less return on investment than Genius. But when comparing it to its historical volatility, National American University is 5.34 times less risky than Genius. It trades about 0.08 of its potential returns per unit of risk. Genius Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  286.00  in Genius Group on September 3, 2024 and sell it today you would lose (206.00) from holding Genius Group or give up 72.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	8.08%
Values	Daily Returns

National American University  vs.  Genius Group

National American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National American University has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, National American is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Genius Group

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Genius Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Genius unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National American and Genius

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

The idea behind National American University and Genius Group 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.