Correlation Between Automobile and Nable Communications

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

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

Diversification Opportunities for Automobile and Nable Communications

-0.58

Correlation Coefficient

Automobile  Nable Communications

Excellent diversification

The 3 months correlation between Automobile and Nable is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Automobile Pc and Nable Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nable Communications and Automobile 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 Automobile Pc are associated (or correlated) with Nable Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nable Communications has no effect on the direction of Automobile i.e., Automobile and Nable Communications go up and down completely randomly.

Pair Corralation between Automobile and Nable Communications

Assuming the 90 days trading horizon Automobile Pc is expected to under-perform the Nable Communications. In addition to that, Automobile is 1.94 times more volatile than Nable Communications. It trades about -0.04 of its total potential returns per unit of risk. Nable Communications is currently generating about 0.0 per unit of volatility. If you would invest  737,000  in Nable Communications on September 14, 2024 and sell it today you would lose (37,000) from holding Nable Communications or give up 5.02% of portfolio value over 90 days.

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

Automobile Pc  vs.  Nable Communications

Automobile Pc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Automobile Pc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Automobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nable Communications

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nable Communications are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nable Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Automobile and Nable Communications

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

The idea behind Automobile Pc and Nable Communications 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.