Correlation Between NRB Industrial and AAA Technologies

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

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

Diversification Opportunities for NRB Industrial and AAA Technologies

0.26

Correlation Coefficient

NRB Industrial  AAA Technologies

Modest diversification

The 3 months correlation between NRB and AAA is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NRB Industrial Bearings and AAA Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAA Technologies and NRB Industrial 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 NRB Industrial Bearings are associated (or correlated) with AAA Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAA Technologies has no effect on the direction of NRB Industrial i.e., NRB Industrial and AAA Technologies go up and down completely randomly.

Pair Corralation between NRB Industrial and AAA Technologies

Assuming the 90 days trading horizon NRB Industrial Bearings is expected to generate 0.95 times more return on investment than AAA Technologies. However, NRB Industrial Bearings is 1.06 times less risky than AAA Technologies. It trades about -0.06 of its potential returns per unit of risk. AAA Technologies Limited is currently generating about -0.16 per unit of risk. If you would invest  2,379  in NRB Industrial Bearings on December 30, 2024 and sell it today you would lose (310.00) from holding NRB Industrial Bearings or give up 13.03% of portfolio value over 90 days.

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

NRB Industrial Bearings  vs.  AAA Technologies Limited

NRB Industrial Bearings

Risk-Adjusted Performance

Very Weak

Over the last 90 days NRB Industrial Bearings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

AAA Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days AAA Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with NRB Industrial and AAA Technologies

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

The idea behind NRB Industrial Bearings and AAA Technologies Limited 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.