Correlation Between NACCO Industries and Natural Resource
Can any of the company-specific risk be diversified away by investing in both NACCO Industries and Natural Resource 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 NACCO Industries and Natural Resource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NACCO Industries and Natural Resource Partners, you can compare the effects of market volatilities on NACCO Industries and Natural Resource 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 NACCO Industries with a short position of Natural Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of NACCO Industries and Natural Resource.
Diversification Opportunities for NACCO Industries and Natural Resource
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NACCO and Natural is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding NACCO Industries and Natural Resource Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Resource Partners and NACCO Industries 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 NACCO Industries are associated (or correlated) with Natural Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Resource Partners has no effect on the direction of NACCO Industries i.e., NACCO Industries and Natural Resource go up and down completely randomly.
Pair Corralation between NACCO Industries and Natural Resource
Allowing for the 90-day total investment horizon NACCO Industries is expected to generate 1.71 times more return on investment than Natural Resource. However, NACCO Industries is 1.71 times more volatile than Natural Resource Partners. It trades about 0.21 of its potential returns per unit of risk. Natural Resource Partners is currently generating about 0.24 per unit of risk. If you would invest 2,758 in NACCO Industries on August 28, 2024 and sell it today you would earn a total of 471.00 from holding NACCO Industries or generate 17.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NACCO Industries vs. Natural Resource Partners
Performance |
| Timeline |
| NACCO Industries |
| Natural Resource Partners |
NACCO Industries and Natural Resource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NACCO Industries and Natural Resource
The main advantage of trading using opposite NACCO Industries and Natural Resource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NACCO Industries position performs unexpectedly, Natural Resource 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 Natural Resource will offset losses from the drop in Natural Resource's long position.| NACCO Industries vs. Alliance Resource Partners | NACCO Industries vs. Hallador Energy | NACCO Industries vs. Consol Energy | NACCO Industries vs. Indo Tambangraya Megah |
| Natural Resource vs. Hallador Energy | Natural Resource vs. Consol Energy | Natural Resource vs. Adaro Energy Tbk | Natural Resource vs. Alliance Resource Partners |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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