Correlation Between National Aerospace and Khgears International

Can any of the company-specific risk be diversified away by investing in both National Aerospace and Khgears International 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 Khgears International 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 Khgears International Limited, you can compare the effects of market volatilities on National Aerospace and Khgears International 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 Khgears International. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Aerospace and Khgears International.

Diversification Opportunities for National Aerospace and Khgears International

0.07

Correlation Coefficient

National Aerospace  Khgears International

Significant diversification

The 3 months correlation between National and Khgears is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding National Aerospace Fasteners and Khgears International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Khgears International 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 Khgears International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Khgears International has no effect on the direction of National Aerospace i.e., National Aerospace and Khgears International go up and down completely randomly.

Pair Corralation between National Aerospace and Khgears International

Assuming the 90 days trading horizon National Aerospace is expected to generate 36.82 times less return on investment than Khgears International. But when comparing it to its historical volatility, National Aerospace Fasteners is 3.06 times less risky than Khgears International. It trades about 0.03 of its potential returns per unit of risk. Khgears International Limited is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  17,900  in Khgears International Limited on September 23, 2024 and sell it today you would earn a total of  7,300  from holding Khgears International Limited or generate 40.78% return on investment over 90 days.

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

National Aerospace Fasteners  vs.  Khgears International Limited

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.

Khgears International

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Khgears International Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Khgears International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Aerospace and Khgears International

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

The idea behind National Aerospace Fasteners and Khgears International Limited 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.