Correlation Between Security Investment and Wah Nobel

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

By analyzing existing cross correlation between Security Investment Bank and Wah Nobel Chemicals, you can compare the effects of market volatilities on Security Investment and Wah Nobel 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 Security Investment with a short position of Wah Nobel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Security Investment and Wah Nobel.

Diversification Opportunities for Security Investment and Wah Nobel

0.05

Correlation Coefficient

Security Investment  Wah Nobel

Significant diversification

The 3 months correlation between Security and Wah is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Security Investment Bank and Wah Nobel Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Nobel Chemicals and Security Investment 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 Security Investment Bank are associated (or correlated) with Wah Nobel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Nobel Chemicals has no effect on the direction of Security Investment i.e., Security Investment and Wah Nobel go up and down completely randomly.

Pair Corralation between Security Investment and Wah Nobel

Assuming the 90 days trading horizon Security Investment is expected to generate 6.55 times less return on investment than Wah Nobel. In addition to that, Security Investment is 2.01 times more volatile than Wah Nobel Chemicals. It trades about 0.01 of its total potential returns per unit of risk. Wah Nobel Chemicals is currently generating about 0.19 per unit of volatility. If you would invest  19,092  in Wah Nobel Chemicals on September 17, 2024 and sell it today you would earn a total of  4,808  from holding Wah Nobel Chemicals or generate 25.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Security Investment Bank  vs.  Wah Nobel Chemicals

Security Investment Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Security Investment Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Security Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wah Nobel Chemicals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Nobel Chemicals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wah Nobel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Security Investment and Wah Nobel

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

The idea behind Security Investment Bank and Wah Nobel Chemicals 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.