Correlation Between GENERAL and NI Holdings

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

By analyzing existing cross correlation between GENERAL ELEC CAP and NI Holdings, you can compare the effects of market volatilities on GENERAL and NI Holdings 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 GENERAL with a short position of NI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of GENERAL and NI Holdings.

Diversification Opportunities for GENERAL and NI Holdings

0.57

Correlation Coefficient

GENERAL  NI Holdings

Very weak diversification

The 3 months correlation between GENERAL and NODK is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding GENERAL ELEC CAP and NI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NI Holdings and GENERAL 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 GENERAL ELEC CAP are associated (or correlated) with NI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NI Holdings has no effect on the direction of GENERAL i.e., GENERAL and NI Holdings go up and down completely randomly.

Pair Corralation between GENERAL and NI Holdings

Assuming the 90 days trading horizon GENERAL is expected to generate 2.73 times less return on investment than NI Holdings. In addition to that, GENERAL is 1.34 times more volatile than NI Holdings. It trades about 0.01 of its total potential returns per unit of risk. NI Holdings is currently generating about 0.02 per unit of volatility. If you would invest  1,360  in NI Holdings on October 11, 2024 and sell it today you would earn a total of  153.00  from holding NI Holdings or generate 11.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	25.0%
Values	Daily Returns

GENERAL ELEC CAP  vs.  NI Holdings

GENERAL ELEC CAP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for GENERAL ELEC CAP investors.

NI Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, NI Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with GENERAL and NI Holdings

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

The idea behind GENERAL ELEC CAP and NI Holdings 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.