Correlation Between National Presto and Safran SA

Can any of the company-specific risk be diversified away by investing in both National Presto and Safran SA 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 National Presto and Safran SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between National Presto Industries and Safran SA, you can compare the effects of market volatilities on National Presto and Safran SA 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 National Presto with a short position of Safran SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Presto and Safran SA.

Diversification Opportunities for National Presto and Safran SA

-0.62

Correlation Coefficient

National Presto  Safran SA

Excellent diversification

The 3 months correlation between National and Safran is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding National Presto Industries and Safran SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safran SA and National Presto 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 National Presto Industries are associated (or correlated) with Safran SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safran SA has no effect on the direction of National Presto i.e., National Presto and Safran SA go up and down completely randomly.

Pair Corralation between National Presto and Safran SA

Considering the 90-day investment horizon National Presto Industries is expected to generate 0.74 times more return on investment than Safran SA. However, National Presto Industries is 1.34 times less risky than Safran SA. It trades about 0.47 of its potential returns per unit of risk. Safran SA is currently generating about -0.03 per unit of risk. If you would invest  7,565  in National Presto Industries on October 17, 2024 and sell it today you would earn a total of  2,145  from holding National Presto Industries or generate 28.35% return on investment over 90 days.

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

National Presto Industries  vs.  Safran SA

National Presto Indu

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in National Presto Industries are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, National Presto disclosed solid returns over the last few months and may actually be approaching a breakup point.

Safran SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Safran SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Safran SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with National Presto and Safran SA

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

The idea behind National Presto Industries and Safran SA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .