Correlation Between NPF MICRO and ABBEY MORTGAGE

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

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

Diversification Opportunities for NPF MICRO and ABBEY MORTGAGE

-0.32

Correlation Coefficient

NPF MICRO  ABBEY MORTGAGE

Very good diversification

The 3 months correlation between NPF and ABBEY is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding NPF MICRO FINANCE and ABBEY MORTGAGE BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABBEY MORTGAGE BANK and NPF MICRO 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 NPF MICRO FINANCE are associated (or correlated) with ABBEY MORTGAGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABBEY MORTGAGE BANK has no effect on the direction of NPF MICRO i.e., NPF MICRO and ABBEY MORTGAGE go up and down completely randomly.

Pair Corralation between NPF MICRO and ABBEY MORTGAGE

Assuming the 90 days trading horizon NPF MICRO FINANCE is expected to under-perform the ABBEY MORTGAGE. But the stock apears to be less risky and, when comparing its historical volatility, NPF MICRO FINANCE is 1.32 times less risky than ABBEY MORTGAGE. The stock trades about -0.03 of its potential returns per unit of risk. The ABBEY MORTGAGE BANK is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  253.00  in ABBEY MORTGAGE BANK on September 5, 2024 and sell it today you would earn a total of  27.00  from holding ABBEY MORTGAGE BANK or generate 10.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

NPF MICRO FINANCE  vs.  ABBEY MORTGAGE BANK

NPF MICRO FINANCE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NPF MICRO FINANCE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, NPF MICRO is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

ABBEY MORTGAGE BANK

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ABBEY MORTGAGE BANK are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, ABBEY MORTGAGE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NPF MICRO and ABBEY MORTGAGE

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

The idea behind NPF MICRO FINANCE and ABBEY MORTGAGE BANK 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..