Correlation Between Union Petrochemical and NSL Foods

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

By analyzing existing cross correlation between Union Petrochemical Public and NSL Foods Public, you can compare the effects of market volatilities on Union Petrochemical and NSL Foods 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 Union Petrochemical with a short position of NSL Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Petrochemical and NSL Foods.

Diversification Opportunities for Union Petrochemical and NSL Foods

0.7

Correlation Coefficient

Union Petrochemical  NSL Foods

Poor diversification

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

Pair Corralation between Union Petrochemical and NSL Foods

Assuming the 90 days trading horizon Union Petrochemical Public is expected to under-perform the NSL Foods. But the stock apears to be less risky and, when comparing its historical volatility, Union Petrochemical Public is 1.39 times less risky than NSL Foods. The stock trades about -0.23 of its potential returns per unit of risk. The NSL Foods Public is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,325  in NSL Foods Public on September 15, 2024 and sell it today you would lose (275.00) from holding NSL Foods Public or give up 8.27% of portfolio value over 90 days.

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

Union Petrochemical Public  vs.  NSL Foods Public

Union Petrochemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Union Petrochemical Public 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 quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

NSL Foods Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NSL Foods Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Union Petrochemical and NSL Foods

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

The idea behind Union Petrochemical Public and NSL Foods Public 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.