Correlation Between ASSOC BR and Nidec

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

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

Diversification Opportunities for ASSOC BR and Nidec

0.27

Correlation Coefficient

ASSOC BR  Nidec

Modest diversification

The 3 months correlation between ASSOC and Nidec is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding ASSOC BR FOODS and Nidec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nidec and ASSOC BR 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 ASSOC BR FOODS are associated (or correlated) with Nidec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nidec has no effect on the direction of ASSOC BR i.e., ASSOC BR and Nidec go up and down completely randomly.

Pair Corralation between ASSOC BR and Nidec

Assuming the 90 days trading horizon ASSOC BR FOODS is expected to generate 0.66 times more return on investment than Nidec. However, ASSOC BR FOODS is 1.52 times less risky than Nidec. It trades about -0.09 of its potential returns per unit of risk. Nidec is currently generating about -0.12 per unit of risk. If you would invest  2,547  in ASSOC BR FOODS on September 24, 2024 and sell it today you would lose (87.00) from holding ASSOC BR FOODS or give up 3.42% of portfolio value over 90 days.

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

ASSOC BR FOODS  vs.  Nidec

ASSOC BR FOODS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASSOC BR FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ASSOC BR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Nidec

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nidec are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental drivers, Nidec reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ASSOC BR and Nidec

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

The idea behind ASSOC BR FOODS and Nidec 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..