Correlation Between NRB Industrial and HMT

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

Diversification Opportunities for NRB Industrial and HMT

0.89

Correlation Coefficient

NRB Industrial  HMT

Very poor diversification

The 3 months correlation between NRB and HMT is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding NRB Industrial Bearings and HMT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMT Limited 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 HMT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMT Limited has no effect on the direction of NRB Industrial i.e., NRB Industrial and HMT go up and down completely randomly.

Pair Corralation between NRB Industrial and HMT

Assuming the 90 days trading horizon NRB Industrial is expected to generate 2.67 times less return on investment than HMT. In addition to that, NRB Industrial is 1.07 times more volatile than HMT Limited. It trades about 0.04 of its total potential returns per unit of risk. HMT Limited is currently generating about 0.1 per unit of volatility. If you would invest  2,765  in HMT Limited on September 12, 2024 and sell it today you would earn a total of  4,157  from holding HMT Limited or generate 150.34% return on investment over 90 days.

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

NRB Industrial Bearings  vs.  HMT Limited

NRB Industrial Bearings

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

HMT Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMT Limited 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with NRB Industrial and HMT

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

The idea behind NRB Industrial Bearings and HMT 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.