Correlation Between Nordon Indstrias and GP Investments

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

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

Diversification Opportunities for Nordon Indstrias and GP Investments

0.46

Correlation Coefficient

Nordon Indstrias  GP Investments

Very weak diversification

The 3 months correlation between Nordon and GPIV33 is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Nordon Indstrias Metalrgicas and GP Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GP Investments and Nordon Indstrias 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 Nordon Indstrias Metalrgicas are associated (or correlated) with GP Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GP Investments has no effect on the direction of Nordon Indstrias i.e., Nordon Indstrias and GP Investments go up and down completely randomly.

Pair Corralation between Nordon Indstrias and GP Investments

Assuming the 90 days trading horizon Nordon Indstrias Metalrgicas is expected to under-perform the GP Investments. But the stock apears to be less risky and, when comparing its historical volatility, Nordon Indstrias Metalrgicas is 1.1 times less risky than GP Investments. The stock trades about -0.22 of its potential returns per unit of risk. The GP Investments is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  373.00  in GP Investments on September 27, 2024 and sell it today you would earn a total of  2.00  from holding GP Investments or generate 0.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.56%
Values	Daily Returns

Nordon Indstrias Metalrgicas  vs.  GP Investments

Nordon Indstrias Met

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordon Indstrias Metalrgicas 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

GP Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GP Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, GP Investments is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nordon Indstrias and GP Investments

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

The idea behind Nordon Indstrias Metalrgicas and GP Investments 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.