Correlation Between NEM INSURANCE and GOLDEN GUINEA

Can any of the company-specific risk be diversified away by investing in both NEM INSURANCE and GOLDEN GUINEA 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 GOLDEN GUINEA 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 GOLDEN GUINEA BREWERIES, you can compare the effects of market volatilities on NEM INSURANCE and GOLDEN GUINEA 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 GOLDEN GUINEA. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEM INSURANCE and GOLDEN GUINEA.

Diversification Opportunities for NEM INSURANCE and GOLDEN GUINEA

0.94

Correlation Coefficient

NEM INSURANCE  GOLDEN GUINEA

Almost no diversification

The 3 months correlation between NEM and GOLDEN is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding NEM INSURANCE PLC and GOLDEN GUINEA BREWERIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLDEN GUINEA BREWERIES 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 GOLDEN GUINEA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOLDEN GUINEA BREWERIES has no effect on the direction of NEM INSURANCE i.e., NEM INSURANCE and GOLDEN GUINEA go up and down completely randomly.

Pair Corralation between NEM INSURANCE and GOLDEN GUINEA

Assuming the 90 days trading horizon NEM INSURANCE is expected to generate 2.03 times less return on investment than GOLDEN GUINEA. But when comparing it to its historical volatility, NEM INSURANCE PLC is 1.02 times less risky than GOLDEN GUINEA. It trades about 0.2 of its potential returns per unit of risk. GOLDEN GUINEA BREWERIES is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  374.00  in GOLDEN GUINEA BREWERIES on October 26, 2024 and sell it today you would earn a total of  490.00  from holding GOLDEN GUINEA BREWERIES or generate 131.02% return on investment over 90 days.

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

NEM INSURANCE PLC  vs.  GOLDEN GUINEA BREWERIES

NEM INSURANCE PLC

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NEM INSURANCE PLC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, NEM INSURANCE unveiled solid returns over the last few months and may actually be approaching a breakup point.

GOLDEN GUINEA BREWERIES

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in GOLDEN GUINEA BREWERIES are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, GOLDEN GUINEA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEM INSURANCE and GOLDEN GUINEA

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

The idea behind NEM INSURANCE PLC and GOLDEN GUINEA BREWERIES 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..