Correlation Between NHPAP and NHPBP

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

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

Diversification Opportunities for NHPAP and NHPBP

0.96

Correlation Coefficient

NHPAP  NHPBP

Almost no diversification

The 3 months correlation between NHPAP and NHPBP is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding NHPAP and NHPBP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NHPBP and NHPAP 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 NHPAP are associated (or correlated) with NHPBP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NHPBP has no effect on the direction of NHPAP i.e., NHPAP and NHPBP go up and down completely randomly.

Pair Corralation between NHPAP and NHPBP

Assuming the 90 days horizon NHPAP is expected to under-perform the NHPBP. But the stock apears to be less risky and, when comparing its historical volatility, NHPAP is 1.04 times less risky than NHPBP. The stock trades about -0.01 of its potential returns per unit of risk. The NHPBP is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,696  in NHPBP on October 10, 2024 and sell it today you would lose (278.00) from holding NHPBP or give up 16.39% of portfolio value over 90 days.

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

NHPAP  vs.  NHPBP

NHPAP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NHPAP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

NHPBP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NHPBP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, NHPBP is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with NHPAP and NHPBP

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

The idea behind NHPAP and NHPBP 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.