Correlation Between NRB Industrial and Max Financial

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

Diversification Opportunities for NRB Industrial and Max Financial

0.29

Correlation Coefficient

NRB Industrial  Max Financial

Modest diversification

The 3 months correlation between NRB and Max is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding NRB Industrial Bearings and Max Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Max Financial Services 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 Max Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Max Financial Services has no effect on the direction of NRB Industrial i.e., NRB Industrial and Max Financial go up and down completely randomly.

Pair Corralation between NRB Industrial and Max Financial

Assuming the 90 days trading horizon NRB Industrial Bearings is expected to generate 1.85 times more return on investment than Max Financial. However, NRB Industrial is 1.85 times more volatile than Max Financial Services. It trades about -0.09 of its potential returns per unit of risk. Max Financial Services is currently generating about -0.32 per unit of risk. If you would invest  2,617  in NRB Industrial Bearings on October 8, 2024 and sell it today you would lose (95.00) from holding NRB Industrial Bearings or give up 3.63% 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.  Max Financial Services

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

Max Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Max Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Max Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NRB Industrial and Max Financial

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

The idea behind NRB Industrial Bearings and Max Financial Services 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.