Correlation Between NIGERIAN BREWERIES and INDUSTRIAL MEDICAL

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

By analyzing existing cross correlation between NIGERIAN BREWERIES PLC and INDUSTRIAL MEDICAL GASES, you can compare the effects of market volatilities on NIGERIAN BREWERIES and INDUSTRIAL MEDICAL 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 NIGERIAN BREWERIES with a short position of INDUSTRIAL MEDICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIGERIAN BREWERIES and INDUSTRIAL MEDICAL.

Diversification Opportunities for NIGERIAN BREWERIES and INDUSTRIAL MEDICAL

0.39

Correlation Coefficient

NIGERIAN BREWERIES  INDUSTRIAL MEDICAL

Weak diversification

The 3 months correlation between NIGERIAN and INDUSTRIAL is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding NIGERIAN BREWERIES PLC and INDUSTRIAL MEDICAL GASES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDUSTRIAL MEDICAL GASES and NIGERIAN BREWERIES 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 NIGERIAN BREWERIES PLC are associated (or correlated) with INDUSTRIAL MEDICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDUSTRIAL MEDICAL GASES has no effect on the direction of NIGERIAN BREWERIES i.e., NIGERIAN BREWERIES and INDUSTRIAL MEDICAL go up and down completely randomly.

Pair Corralation between NIGERIAN BREWERIES and INDUSTRIAL MEDICAL

Assuming the 90 days trading horizon NIGERIAN BREWERIES PLC is expected to generate 50.41 times more return on investment than INDUSTRIAL MEDICAL. However, NIGERIAN BREWERIES is 50.41 times more volatile than INDUSTRIAL MEDICAL GASES. It trades about 0.11 of its potential returns per unit of risk. INDUSTRIAL MEDICAL GASES is currently generating about 0.23 per unit of risk. If you would invest  3,100  in NIGERIAN BREWERIES PLC on October 23, 2024 and sell it today you would earn a total of  90.00  from holding NIGERIAN BREWERIES PLC or generate 2.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NIGERIAN BREWERIES PLC  vs.  INDUSTRIAL MEDICAL GASES

NIGERIAN BREWERIES PLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NIGERIAN BREWERIES PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, NIGERIAN BREWERIES sustained solid returns over the last few months and may actually be approaching a breakup point.

INDUSTRIAL MEDICAL GASES

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INDUSTRIAL MEDICAL GASES are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, INDUSTRIAL MEDICAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NIGERIAN BREWERIES and INDUSTRIAL MEDICAL

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

The idea behind NIGERIAN BREWERIES PLC and INDUSTRIAL MEDICAL GASES 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.