Correlation Between Advanced Info and NC Housing

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

By analyzing existing cross correlation between Advanced Info Service and NC Housing Public, you can compare the effects of market volatilities on Advanced Info and NC Housing 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 Advanced Info with a short position of NC Housing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Info and NC Housing.

Diversification Opportunities for Advanced Info and NC Housing

-0.58

Correlation Coefficient

Advanced Info  NC Housing

Excellent diversification

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

Pair Corralation between Advanced Info and NC Housing

Assuming the 90 days trading horizon Advanced Info Service is expected to generate 1.14 times more return on investment than NC Housing. However, Advanced Info is 1.14 times more volatile than NC Housing Public. It trades about 0.07 of its potential returns per unit of risk. NC Housing Public is currently generating about -0.12 per unit of risk. If you would invest  26,500  in Advanced Info Service on September 24, 2024 and sell it today you would earn a total of  1,900  from holding Advanced Info Service or generate 7.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Advanced Info Service  vs.  NC Housing Public

Advanced Info Service

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Info Service are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Advanced Info may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NC Housing Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NC Housing Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Advanced Info and NC Housing

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

The idea behind Advanced Info Service and NC Housing Public 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.