Correlation Between National Foods and Wah Nobel
Can any of the company-specific risk be diversified away by investing in both National Foods and Wah Nobel 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 National Foods and Wah Nobel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Foods and Wah Nobel Chemicals, you can compare the effects of market volatilities on National Foods and Wah Nobel 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 National Foods with a short position of Wah Nobel. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Foods and Wah Nobel.
Diversification Opportunities for National Foods and Wah Nobel
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between National and Wah is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding National Foods and Wah Nobel Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Nobel Chemicals and National Foods 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 National Foods are associated (or correlated) with Wah Nobel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Nobel Chemicals has no effect on the direction of National Foods i.e., National Foods and Wah Nobel go up and down completely randomly.
Pair Corralation between National Foods and Wah Nobel
Assuming the 90 days trading horizon National Foods is expected to under-perform the Wah Nobel. But the stock apears to be less risky and, when comparing its historical volatility, National Foods is 1.69 times less risky than Wah Nobel. The stock trades about -0.06 of its potential returns per unit of risk. The Wah Nobel Chemicals is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 22,631 in Wah Nobel Chemicals on August 28, 2024 and sell it today you would lose (332.00) from holding Wah Nobel Chemicals or give up 1.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Foods vs. Wah Nobel Chemicals
Performance |
| Timeline |
| National Foods |
| Wah Nobel Chemicals |
National Foods and Wah Nobel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Foods and Wah Nobel
The main advantage of trading using opposite National Foods and Wah Nobel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Foods position performs unexpectedly, Wah Nobel 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 Wah Nobel will offset losses from the drop in Wah Nobel's long position.| National Foods vs. Matco Foods | National Foods vs. Pakistan Aluminium Beverage | National Foods vs. Crescent Star Insurance | National Foods vs. Unity Foods |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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