Correlation Between National Silicon and New Trend

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

By analyzing existing cross correlation between National Silicon Industry and New Trend International, you can compare the effects of market volatilities on National Silicon and New Trend 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 Silicon with a short position of New Trend. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Silicon and New Trend.

Diversification Opportunities for National Silicon and New Trend

0.84

Correlation Coefficient

National Silicon  New Trend

Very poor diversification

The 3 months correlation between National and New is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding National Silicon Industry and New Trend International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Trend International and National Silicon 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 Silicon Industry are associated (or correlated) with New Trend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Trend International has no effect on the direction of National Silicon i.e., National Silicon and New Trend go up and down completely randomly.

Pair Corralation between National Silicon and New Trend

Assuming the 90 days trading horizon National Silicon Industry is expected to generate 1.1 times more return on investment than New Trend. However, National Silicon is 1.1 times more volatile than New Trend International. It trades about 0.16 of its potential returns per unit of risk. New Trend International is currently generating about 0.13 per unit of risk. If you would invest  1,329  in National Silicon Industry on September 18, 2024 and sell it today you would earn a total of  754.00  from holding National Silicon Industry or generate 56.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

National Silicon Industry  vs.  New Trend International

National Silicon Industry

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Silicon Industry are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, National Silicon sustained solid returns over the last few months and may actually be approaching a breakup point.

New Trend International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Trend International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, New Trend sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Silicon and New Trend

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

The idea behind National Silicon Industry and New Trend International 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.