Correlation Between Cambridge Technology and NRB Industrial
Can any of the company-specific risk be diversified away by investing in both Cambridge Technology and NRB Industrial 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 Cambridge Technology and NRB Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cambridge Technology Enterprises and NRB Industrial Bearings, you can compare the effects of market volatilities on Cambridge Technology and NRB Industrial 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 Cambridge Technology with a short position of NRB Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cambridge Technology and NRB Industrial.
Diversification Opportunities for Cambridge Technology and NRB Industrial
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cambridge and NRB is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cambridge Technology Enterpris and NRB Industrial Bearings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRB Industrial Bearings and Cambridge Technology 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 Cambridge Technology Enterprises are associated (or correlated) with NRB Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRB Industrial Bearings has no effect on the direction of Cambridge Technology i.e., Cambridge Technology and NRB Industrial go up and down completely randomly.
Pair Corralation between Cambridge Technology and NRB Industrial
Assuming the 90 days trading horizon Cambridge Technology Enterprises is expected to generate 1.58 times more return on investment than NRB Industrial. However, Cambridge Technology is 1.58 times more volatile than NRB Industrial Bearings. It trades about -0.04 of its potential returns per unit of risk. NRB Industrial Bearings is currently generating about -0.2 per unit of risk. If you would invest 10,501 in Cambridge Technology Enterprises on October 13, 2024 and sell it today you would lose (395.00) from holding Cambridge Technology Enterprises or give up 3.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Cambridge Technology Enterpris vs. NRB Industrial Bearings
Performance |
| Timeline |
| Cambridge Technology |
| NRB Industrial Bearings |
Cambridge Technology and NRB Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cambridge Technology and NRB Industrial
The main advantage of trading using opposite Cambridge Technology and NRB Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cambridge Technology position performs unexpectedly, NRB Industrial 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 NRB Industrial will offset losses from the drop in NRB Industrial's long position.The idea behind Cambridge Technology Enterprises and NRB Industrial Bearings 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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Check out your portfolio center.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.
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