Correlation Between Premier and National Research

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

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

Diversification Opportunities for Premier and National Research

0.13

Correlation Coefficient

Premier  National Research

Average diversification

The 3 months correlation between Premier and National is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Premier and National Research Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Research Corp and Premier 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 Premier are associated (or correlated) with National Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Research Corp has no effect on the direction of Premier i.e., Premier and National Research go up and down completely randomly.

Pair Corralation between Premier and National Research

Given the investment horizon of 90 days Premier is expected to generate 0.86 times more return on investment than National Research. However, Premier is 1.17 times less risky than National Research. It trades about -0.15 of its potential returns per unit of risk. National Research Corp is currently generating about -0.16 per unit of risk. If you would invest  2,290  in Premier on November 28, 2024 and sell it today you would lose (466.00) from holding Premier or give up 20.35% of portfolio value over 90 days.

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

Premier  vs.  National Research Corp

Premier

Risk-Adjusted Performance

Very Weak

Over the last 90 days Premier has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

National Research Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Research Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Premier and National Research

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

The idea behind Premier and National Research Corp 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.