Correlation Between NEM INSURANCE and ABBEY MORTGAGE

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

By analyzing existing cross correlation between NEM INSURANCE PLC and ABBEY MORTGAGE BANK, you can compare the effects of market volatilities on NEM INSURANCE and ABBEY MORTGAGE 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 NEM INSURANCE with a short position of ABBEY MORTGAGE. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEM INSURANCE and ABBEY MORTGAGE.

Diversification Opportunities for NEM INSURANCE and ABBEY MORTGAGE

0.65

Correlation Coefficient

NEM INSURANCE  ABBEY MORTGAGE

Poor diversification

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

Pair Corralation between NEM INSURANCE and ABBEY MORTGAGE

Assuming the 90 days trading horizon NEM INSURANCE is expected to generate 2.19 times less return on investment than ABBEY MORTGAGE. In addition to that, NEM INSURANCE is 1.09 times more volatile than ABBEY MORTGAGE BANK. It trades about 0.17 of its total potential returns per unit of risk. ABBEY MORTGAGE BANK is currently generating about 0.4 per unit of volatility. If you would invest  280.00  in ABBEY MORTGAGE BANK on October 20, 2024 and sell it today you would earn a total of  83.00  from holding ABBEY MORTGAGE BANK or generate 29.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

NEM INSURANCE PLC  vs.  ABBEY MORTGAGE BANK

NEM INSURANCE PLC

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NEM INSURANCE PLC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NEM INSURANCE unveiled solid returns over the last few months and may actually be approaching a breakup point.

ABBEY MORTGAGE BANK

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ABBEY MORTGAGE BANK are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, ABBEY MORTGAGE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEM INSURANCE and ABBEY MORTGAGE

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

The idea behind NEM INSURANCE PLC and ABBEY MORTGAGE BANK 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.