Correlation Between North East and Sri Trang

Can any of the company-specific risk be diversified away by investing in both North East and Sri Trang 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 North East and Sri Trang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between North East Rubbers and Sri Trang Agro Industry, you can compare the effects of market volatilities on North East and Sri Trang 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 North East with a short position of Sri Trang. Check out your portfolio center. Please also check ongoing floating volatility patterns of North East and Sri Trang.

Diversification Opportunities for North East and Sri Trang

0.91

Correlation Coefficient

North East  Sri Trang

Almost no diversification

The 3 months correlation between North and Sri is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding North East Rubbers and Sri Trang Agro Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sri Trang Agro and North East 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 North East Rubbers are associated (or correlated) with Sri Trang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sri Trang Agro has no effect on the direction of North East i.e., North East and Sri Trang go up and down completely randomly.

Pair Corralation between North East and Sri Trang

Assuming the 90 days trading horizon North East is expected to generate 1.61 times less return on investment than Sri Trang. But when comparing it to its historical volatility, North East Rubbers is 1.76 times less risky than Sri Trang. It trades about 0.03 of its potential returns per unit of risk. Sri Trang Agro Industry is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,638  in Sri Trang Agro Industry on September 12, 2024 and sell it today you would earn a total of  252.00  from holding Sri Trang Agro Industry or generate 15.38% return on investment over 90 days.

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

North East Rubbers  vs.  Sri Trang Agro Industry

North East Rubbers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North East Rubbers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, North East is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Sri Trang Agro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sri Trang Agro Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with North East and Sri Trang

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

The idea behind North East Rubbers and Sri Trang Agro Industry 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.