Correlation Between Nsx and High Tech

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

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

Diversification Opportunities for Nsx and High Tech

-0.75

Correlation Coefficient

Nsx  High Tech

Pay attention - limited upside

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

Pair Corralation between Nsx and High Tech

Assuming the 90 days trading horizon Nsx is expected to under-perform the High Tech. In addition to that, Nsx is 4.5 times more volatile than High Tech Metals. It trades about -0.13 of its total potential returns per unit of risk. High Tech Metals is currently generating about 0.18 per unit of volatility. If you would invest  14.00  in High Tech Metals on October 23, 2024 and sell it today you would earn a total of  2.00  from holding High Tech Metals or generate 14.29% return on investment over 90 days.

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

Nsx  vs.  High Tech Metals

Nsx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nsx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

High Tech Metals

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in High Tech Metals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, High Tech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nsx and High Tech

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

The idea behind Nsx and High Tech Metals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.