Correlation Between National Refinery and Century Paper
Can any of the company-specific risk be diversified away by investing in both National Refinery and Century Paper 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 Refinery and Century Paper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Refinery and Century Paper Board, you can compare the effects of market volatilities on National Refinery and Century Paper 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 Refinery with a short position of Century Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Refinery and Century Paper.
Diversification Opportunities for National Refinery and Century Paper
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between National and Century is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding National Refinery and Century Paper Board in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Paper Board and National Refinery 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 Refinery are associated (or correlated) with Century Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Paper Board has no effect on the direction of National Refinery i.e., National Refinery and Century Paper go up and down completely randomly.
Pair Corralation between National Refinery and Century Paper
Assuming the 90 days trading horizon National Refinery is expected to generate 1.14 times more return on investment than Century Paper. However, National Refinery is 1.14 times more volatile than Century Paper Board. It trades about 0.11 of its potential returns per unit of risk. Century Paper Board is currently generating about 0.08 per unit of risk. If you would invest 21,245 in National Refinery on October 27, 2024 and sell it today you would earn a total of 4,935 from holding National Refinery or generate 23.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 98.44% |
Values | Daily Returns |
National Refinery vs. Century Paper Board
Performance |
Timeline |
National Refinery |
Century Paper Board |
National Refinery and Century Paper Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with National Refinery and Century Paper
The main advantage of trading using opposite National Refinery and Century Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Refinery position performs unexpectedly, Century Paper 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 Century Paper will offset losses from the drop in Century Paper's long position.National Refinery vs. Atlas Insurance | ||
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Check out your portfolio center.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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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