Correlation Between NCS Multistage and Bri Chem

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

By analyzing existing cross correlation between NCS Multistage Holdings and Bri Chem Corp, you can compare the effects of market volatilities on NCS Multistage and Bri Chem 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 NCS Multistage with a short position of Bri Chem. Check out your portfolio center. Please also check ongoing floating volatility patterns of NCS Multistage and Bri Chem.

Diversification Opportunities for NCS Multistage and Bri Chem

0.02

Correlation Coefficient

NCS Multistage  Bri Chem

Significant diversification

The 3 months correlation between NCS and Bri is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding NCS Multistage Holdings and Bri Chem Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bri Chem Corp and NCS Multistage 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 NCS Multistage Holdings are associated (or correlated) with Bri Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bri Chem Corp has no effect on the direction of NCS Multistage i.e., NCS Multistage and Bri Chem go up and down completely randomly.

Pair Corralation between NCS Multistage and Bri Chem

Given the investment horizon of 90 days NCS Multistage Holdings is expected to generate 0.57 times more return on investment than Bri Chem. However, NCS Multistage Holdings is 1.75 times less risky than Bri Chem. It trades about 0.16 of its potential returns per unit of risk. Bri Chem Corp is currently generating about 0.04 per unit of risk. If you would invest  2,448  in NCS Multistage Holdings on December 26, 2024 and sell it today you would earn a total of  1,219  from holding NCS Multistage Holdings or generate 49.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

NCS Multistage Holdings  vs.  Bri Chem Corp

NCS Multistage Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NCS Multistage Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, NCS Multistage displayed solid returns over the last few months and may actually be approaching a breakup point.

Bri Chem Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bri Chem Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Bri Chem reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NCS Multistage and Bri Chem

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

The idea behind NCS Multistage Holdings and Bri Chem Corp 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 Global Correlations module to find global opportunities by holding instruments from different markets.