Correlation Between National Reinsurance and Apex Mining

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

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

Diversification Opportunities for National Reinsurance and Apex Mining

0.75

Correlation Coefficient

National Reinsurance  Apex Mining

Poor diversification

The 3 months correlation between National and Apex is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding National Reinsurance and Apex Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apex Mining and National Reinsurance 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 Reinsurance are associated (or correlated) with Apex Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apex Mining has no effect on the direction of National Reinsurance i.e., National Reinsurance and Apex Mining go up and down completely randomly.

Pair Corralation between National Reinsurance and Apex Mining

Assuming the 90 days trading horizon National Reinsurance is expected to generate 2.76 times more return on investment than Apex Mining. However, National Reinsurance is 2.76 times more volatile than Apex Mining Co. It trades about -0.03 of its potential returns per unit of risk. Apex Mining Co is currently generating about -0.11 per unit of risk. If you would invest  80.00  in National Reinsurance on September 14, 2024 and sell it today you would lose (12.00) from holding National Reinsurance or give up 15.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

National Reinsurance  vs.  Apex Mining Co

National Reinsurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Reinsurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Apex Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apex Mining Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with National Reinsurance and Apex Mining

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

The idea behind National Reinsurance and Apex Mining Co 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.