Correlation Between Industrial Investment and NBCC

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

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

Diversification Opportunities for Industrial Investment and NBCC

-0.7

Correlation Coefficient

Industrial Investment  NBCC

Excellent diversification

The 3 months correlation between Industrial and NBCC is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Investment Trust and NBCC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBCC Limited and Industrial Investment 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 Industrial Investment Trust are associated (or correlated) with NBCC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBCC Limited has no effect on the direction of Industrial Investment i.e., Industrial Investment and NBCC go up and down completely randomly.

Pair Corralation between Industrial Investment and NBCC

Assuming the 90 days trading horizon Industrial Investment Trust is expected to generate 0.91 times more return on investment than NBCC. However, Industrial Investment Trust is 1.09 times less risky than NBCC. It trades about 0.23 of its potential returns per unit of risk. NBCC Limited is currently generating about -0.13 per unit of risk. If you would invest  27,595  in Industrial Investment Trust on September 23, 2024 and sell it today you would earn a total of  10,470  from holding Industrial Investment Trust or generate 37.94% return on investment over 90 days.

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

Industrial Investment Trust  vs.  NBCC Limited

Industrial Investment

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Investment Trust are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Industrial Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

NBCC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NBCC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Industrial Investment and NBCC

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

The idea behind Industrial Investment Trust and NBCC 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.