Correlation Between NR 21 and Smcp SAS

Can any of the company-specific risk be diversified away by investing in both NR 21 and Smcp SAS 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 NR 21 and Smcp SAS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NR 21 SA and Smcp SAS, you can compare the effects of market volatilities on NR 21 and Smcp SAS 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 NR 21 with a short position of Smcp SAS. Check out your portfolio center. Please also check ongoing floating volatility patterns of NR 21 and Smcp SAS.

Diversification Opportunities for NR 21 and Smcp SAS

-0.8

Correlation Coefficient

NR 21  Smcp SAS

Pay attention - limited upside

The 3 months correlation between NR21 and Smcp is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding NR 21 SA and Smcp SAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smcp SAS and NR 21 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 NR 21 SA are associated (or correlated) with Smcp SAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smcp SAS has no effect on the direction of NR 21 i.e., NR 21 and Smcp SAS go up and down completely randomly.

Pair Corralation between NR 21 and Smcp SAS

Assuming the 90 days trading horizon NR 21 is expected to generate 134.28 times less return on investment than Smcp SAS. But when comparing it to its historical volatility, NR 21 SA is 1.61 times less risky than Smcp SAS. It trades about 0.0 of its potential returns per unit of risk. Smcp SAS is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  240.00  in Smcp SAS on September 26, 2024 and sell it today you would earn a total of  109.00  from holding Smcp SAS or generate 45.42% return on investment over 90 days.

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

NR 21 SA  vs.  Smcp SAS

NR 21 SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NR 21 SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NR 21 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Smcp SAS

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smcp SAS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Smcp SAS sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NR 21 and Smcp SAS

The main advantage of trading using opposite NR 21 and Smcp SAS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NR 21 position performs unexpectedly, Smcp SAS 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 Smcp SAS will offset losses from the drop in Smcp SAS's long position.

The idea behind NR 21 SA and Smcp SAS 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.