Correlation Between NRB Industrial and Bosch

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

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

Diversification Opportunities for NRB Industrial and Bosch

-0.13

Correlation Coefficient

NRB Industrial  Bosch

Good diversification

The 3 months correlation between NRB and Bosch is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding NRB Industrial Bearings and Bosch Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bosch Limited and NRB Industrial 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 NRB Industrial Bearings are associated (or correlated) with Bosch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bosch Limited has no effect on the direction of NRB Industrial i.e., NRB Industrial and Bosch go up and down completely randomly.

Pair Corralation between NRB Industrial and Bosch

Assuming the 90 days trading horizon NRB Industrial Bearings is expected to under-perform the Bosch. In addition to that, NRB Industrial is 1.89 times more volatile than Bosch Limited. It trades about -0.15 of its total potential returns per unit of risk. Bosch Limited is currently generating about 0.08 per unit of volatility. If you would invest  3,245,185  in Bosch Limited on September 4, 2024 and sell it today you would earn a total of  247,630  from holding Bosch Limited or generate 7.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

NRB Industrial Bearings  vs.  Bosch Limited

NRB Industrial Bearings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NRB Industrial Bearings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain 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.

Bosch Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bosch Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Bosch may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NRB Industrial and Bosch

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

The idea behind NRB Industrial Bearings and Bosch 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.