Correlation Between Pardee Resources and National Stock

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

By analyzing existing cross correlation between Pardee Resources Co and National Stock Yards, you can compare the effects of market volatilities on Pardee Resources and National Stock 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 Pardee Resources with a short position of National Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pardee Resources and National Stock.

Diversification Opportunities for Pardee Resources and National Stock

0.28

Correlation Coefficient

Pardee Resources  National Stock

Modest diversification

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

Pair Corralation between Pardee Resources and National Stock

Given the investment horizon of 90 days Pardee Resources is expected to generate 2.45 times less return on investment than National Stock. But when comparing it to its historical volatility, Pardee Resources Co is 1.35 times less risky than National Stock. It trades about 0.07 of its potential returns per unit of risk. National Stock Yards is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  22,700  in National Stock Yards on October 9, 2024 and sell it today you would earn a total of  7,800  from holding National Stock Yards or generate 34.36% return on investment over 90 days.

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

Pardee Resources Co  vs.  National Stock Yards

Pardee Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pardee Resources Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Pardee Resources reported solid returns over the last few months and may actually be approaching a breakup point.

National Stock Yards

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Stock Yards are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, National Stock exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pardee Resources and National Stock

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

The idea behind Pardee Resources Co and National Stock Yards 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.