Correlation Between Abak SA and NGG

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

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

Diversification Opportunities for Abak SA and NGG

-0.22

Correlation Coefficient

Abak SA  NGG

Very good diversification

The 3 months correlation between Abak and NGG is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Abak SA and NGG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGG and Abak SA 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 Abak SA are associated (or correlated) with NGG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGG has no effect on the direction of Abak SA i.e., Abak SA and NGG go up and down completely randomly.

Pair Corralation between Abak SA and NGG

Assuming the 90 days trading horizon Abak SA is expected to under-perform the NGG. But the stock apears to be less risky and, when comparing its historical volatility, Abak SA is 1.88 times less risky than NGG. The stock trades about -0.23 of its potential returns per unit of risk. The NGG is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  4.70  in NGG on September 15, 2024 and sell it today you would lose (1.40) from holding NGG or give up 29.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	31.75%
Values	Daily Returns

Abak SA  vs.  NGG

Abak SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Abak SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

NGG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NGG has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Abak SA and NGG

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

The idea behind Abak SA and NGG 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.