Correlation Between Northking Information and Industrial Securities

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

By analyzing existing cross correlation between Northking Information Technology and Industrial Securities Co, you can compare the effects of market volatilities on Northking Information and Industrial Securities 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 Northking Information with a short position of Industrial Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northking Information and Industrial Securities.

Diversification Opportunities for Northking Information and Industrial Securities

0.9

Correlation Coefficient

Northking Information  Industrial Securities

Almost no diversification

The 3 months correlation between Northking and Industrial is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Northking Information Technolo and Industrial Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Securities and Northking Information 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 Northking Information Technology are associated (or correlated) with Industrial Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Securities has no effect on the direction of Northking Information i.e., Northking Information and Industrial Securities go up and down completely randomly.

Pair Corralation between Northking Information and Industrial Securities

Assuming the 90 days trading horizon Northking Information Technology is expected to generate 1.99 times more return on investment than Industrial Securities. However, Northking Information is 1.99 times more volatile than Industrial Securities Co. It trades about -0.07 of its potential returns per unit of risk. Industrial Securities Co is currently generating about -0.22 per unit of risk. If you would invest  1,639  in Northking Information Technology on September 12, 2024 and sell it today you would lose (81.00) from holding Northking Information Technology or give up 4.94% of portfolio value over 90 days.

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

Northking Information Technolo  vs.  Industrial Securities Co

Northking Information

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northking Information Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Northking Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Industrial Securities

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Securities Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial Securities sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Northking Information and Industrial Securities

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

The idea behind Northking Information Technology and Industrial Securities Co 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.