Correlation Between National Aerospace and TBI Motion

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

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

Diversification Opportunities for National Aerospace and TBI Motion

-0.13

Correlation Coefficient

National Aerospace  TBI Motion

Good diversification

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

Pair Corralation between National Aerospace and TBI Motion

Assuming the 90 days trading horizon National Aerospace Fasteners is expected to under-perform the TBI Motion. But the stock apears to be less risky and, when comparing its historical volatility, National Aerospace Fasteners is 3.41 times less risky than TBI Motion. The stock trades about -0.04 of its potential returns per unit of risk. The TBI Motion Technology is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,270  in TBI Motion Technology on September 23, 2024 and sell it today you would earn a total of  1,100  from holding TBI Motion Technology or generate 25.76% return on investment over 90 days.

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

National Aerospace Fasteners  vs.  TBI Motion Technology

National Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Aerospace Fasteners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, National Aerospace is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

TBI Motion Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TBI Motion Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TBI Motion showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Aerospace and TBI Motion

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

The idea behind National Aerospace Fasteners and TBI Motion Technology 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.