Correlation Between NR 21 and Centrale DAchat

Can any of the company-specific risk be diversified away by investing in both NR 21 and Centrale DAchat 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 NR 21 and Centrale DAchat into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NR 21 SA and Centrale dAchat Franaise, you can compare the effects of market volatilities on NR 21 and Centrale DAchat 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 NR 21 with a short position of Centrale DAchat. Check out your portfolio center. Please also check ongoing floating volatility patterns of NR 21 and Centrale DAchat.

Diversification Opportunities for NR 21 and Centrale DAchat

0.64

Correlation Coefficient

NR 21  Centrale DAchat

Poor diversification

The 3 months correlation between NR21 and Centrale is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding NR 21 SA and Centrale dAchat Franaise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrale dAchat Franaise and NR 21 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 NR 21 SA are associated (or correlated) with Centrale DAchat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrale dAchat Franaise has no effect on the direction of NR 21 i.e., NR 21 and Centrale DAchat go up and down completely randomly.

Pair Corralation between NR 21 and Centrale DAchat

Assuming the 90 days trading horizon NR 21 SA is expected to generate 1.69 times more return on investment than Centrale DAchat. However, NR 21 is 1.69 times more volatile than Centrale dAchat Franaise. It trades about -0.01 of its potential returns per unit of risk. Centrale dAchat Franaise is currently generating about -0.05 per unit of risk. If you would invest  3,560  in NR 21 SA on October 15, 2024 and sell it today you would lose (120.00) from holding NR 21 SA or give up 3.37% of portfolio value over 90 days.

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

NR 21 SA  vs.  Centrale dAchat Franaise

NR 21 SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NR 21 SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NR 21 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Centrale dAchat Franaise

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NR 21 and Centrale DAchat

The main advantage of trading using opposite NR 21 and Centrale DAchat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NR 21 position performs unexpectedly, Centrale DAchat 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 Centrale DAchat will offset losses from the drop in Centrale DAchat's long position.

The idea behind NR 21 SA and Centrale dAchat Franaise 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.