Correlation Between National Refinery and Century Paper

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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

NationalCenturyDiversified AwayNationalCenturyDiversified Away100%
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 Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy98.44%
ValuesDaily Returns

National Refinery  vs.  Century Paper Board

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 01020304050
JavaScript chart by amCharts 3.21.15NRL CEPB
       Timeline  
National Refinery 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in National Refinery are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, National Refinery reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan220240260280300320340
Century Paper Board 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Century Paper Board are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Century Paper sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan262830323436

National Refinery and Century Paper Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-11.05-8.28-5.5-2.730.02.835.758.6711.614.52 0.0150.0200.0250.0300.0350.040
JavaScript chart by amCharts 3.21.15NRL CEPB
       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.
The idea behind National Refinery and Century Paper Board 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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