Correlation Between Nsx and Sky Metals

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

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

Diversification Opportunities for Nsx and Sky Metals

0.28

Correlation Coefficient

Nsx  Sky Metals

Modest diversification

The 3 months correlation between Nsx and Sky is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Nsx and Sky Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sky 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 Sky Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sky Metals has no effect on the direction of Nsx i.e., Nsx and Sky Metals go up and down completely randomly.

Pair Corralation between Nsx and Sky Metals

Assuming the 90 days trading horizon Nsx is expected to under-perform the Sky Metals. But the stock apears to be less risky and, when comparing its historical volatility, Nsx is 1.02 times less risky than Sky Metals. The stock trades about -0.02 of its potential returns per unit of risk. The Sky Metals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4.70  in Sky Metals on October 4, 2024 and sell it today you would earn a total of  0.70  from holding Sky Metals or generate 14.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.79%
Values	Daily Returns

Nsx  vs.  Sky 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 comparatively stable basic indicators, Nsx is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Sky Metals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sky Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sky Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nsx and Sky Metals

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

The idea behind Nsx and Sky 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.