Correlation Between NVent Electric and Ilika Plc

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

By analyzing existing cross correlation between nVent Electric PLC and Ilika plc, you can compare the effects of market volatilities on NVent Electric and Ilika Plc 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 NVent Electric with a short position of Ilika Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVent Electric and Ilika Plc.

Diversification Opportunities for NVent Electric and Ilika Plc

-0.48

Correlation Coefficient

NVent Electric  Ilika Plc

Very good diversification

The 3 months correlation between NVent and Ilika is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding nVent Electric PLC and Ilika plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ilika plc and NVent Electric 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 nVent Electric PLC are associated (or correlated) with Ilika Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ilika plc has no effect on the direction of NVent Electric i.e., NVent Electric and Ilika Plc go up and down completely randomly.

Pair Corralation between NVent Electric and Ilika Plc

Considering the 90-day investment horizon nVent Electric PLC is expected to generate 0.52 times more return on investment than Ilika Plc. However, nVent Electric PLC is 1.91 times less risky than Ilika Plc. It trades about 0.01 of its potential returns per unit of risk. Ilika plc is currently generating about -0.05 per unit of risk. If you would invest  7,015  in nVent Electric PLC on September 23, 2024 and sell it today you would lose (60.00) from holding nVent Electric PLC or give up 0.86% of portfolio value over 90 days.

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

nVent Electric PLC  vs.  Ilika plc

nVent Electric PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days nVent Electric PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NVent Electric is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Ilika plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ilika plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NVent Electric and Ilika Plc

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

The idea behind nVent Electric PLC and Ilika plc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.