Correlation Between Nemak S and Orbia Advance

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

By analyzing existing cross correlation between Nemak S A and Orbia Advance, you can compare the effects of market volatilities on Nemak S and Orbia Advance 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 Nemak S with a short position of Orbia Advance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nemak S and Orbia Advance.

Diversification Opportunities for Nemak S and Orbia Advance

-0.57

Correlation Coefficient

Nemak S  Orbia Advance

Excellent diversification

The 3 months correlation between Nemak and Orbia is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Nemak S A and Orbia Advance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orbia Advance and Nemak S 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 Nemak S A are associated (or correlated) with Orbia Advance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orbia Advance has no effect on the direction of Nemak S i.e., Nemak S and Orbia Advance go up and down completely randomly.

Pair Corralation between Nemak S and Orbia Advance

Assuming the 90 days trading horizon Nemak S A is expected to generate 1.71 times more return on investment than Orbia Advance. However, Nemak S is 1.71 times more volatile than Orbia Advance. It trades about 0.11 of its potential returns per unit of risk. Orbia Advance is currently generating about -0.16 per unit of risk. If you would invest  197.00  in Nemak S A on October 3, 2024 and sell it today you would earn a total of  50.00  from holding Nemak S A or generate 25.38% return on investment over 90 days.

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

Nemak S A  vs.  Orbia Advance

Nemak S A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nemak S A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Nemak S sustained solid returns over the last few months and may actually be approaching a breakup point.

Orbia Advance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orbia Advance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Nemak S and Orbia Advance

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

The idea behind Nemak S A and Orbia Advance 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.