Correlation Between Norstar and Amanet Management

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

By analyzing existing cross correlation between Norstar and Amanet Management Systems, you can compare the effects of market volatilities on Norstar and Amanet Management 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 Norstar with a short position of Amanet Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norstar and Amanet Management.

Diversification Opportunities for Norstar and Amanet Management

0.63

Correlation Coefficient

Norstar  Amanet Management

Poor diversification

The 3 months correlation between Norstar and Amanet is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Norstar and Amanet Management Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amanet Management Systems and Norstar 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 Norstar are associated (or correlated) with Amanet Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amanet Management Systems has no effect on the direction of Norstar i.e., Norstar and Amanet Management go up and down completely randomly.

Pair Corralation between Norstar and Amanet Management

Assuming the 90 days trading horizon Norstar is expected to generate 1.98 times more return on investment than Amanet Management. However, Norstar is 1.98 times more volatile than Amanet Management Systems. It trades about 0.26 of its potential returns per unit of risk. Amanet Management Systems is currently generating about 0.06 per unit of risk. If you would invest  107,200  in Norstar on September 5, 2024 and sell it today you would earn a total of  43,100  from holding Norstar or generate 40.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.83%
Values	Daily Returns

Norstar  vs.  Amanet Management Systems

Norstar

Risk-Adjusted Performance

20 of 100

Solid

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

Amanet Management Systems

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Amanet Management Systems are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Amanet Management is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Norstar and Amanet Management

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

The idea behind Norstar and Amanet Management Systems 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.