Correlation Between NRB Industrial and Spencers Retail

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Can any of the company-specific risk be diversified away by investing in both NRB Industrial and Spencers Retail 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 NRB Industrial and Spencers Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRB Industrial Bearings and Spencers Retail Limited, you can compare the effects of market volatilities on NRB Industrial and Spencers Retail 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 NRB Industrial with a short position of Spencers Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRB Industrial and Spencers Retail.

Diversification Opportunities for NRB Industrial and Spencers Retail

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between NRB and Spencers is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding NRB Industrial Bearings and Spencers Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spencers Retail and NRB Industrial 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 NRB Industrial Bearings are associated (or correlated) with Spencers Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spencers Retail has no effect on the direction of NRB Industrial i.e., NRB Industrial and Spencers Retail go up and down completely randomly.

Pair Corralation between NRB Industrial and Spencers Retail

Assuming the 90 days trading horizon NRB Industrial Bearings is expected to under-perform the Spencers Retail. But the stock apears to be less risky and, when comparing its historical volatility, NRB Industrial Bearings is 1.05 times less risky than Spencers Retail. The stock trades about -0.36 of its potential returns per unit of risk. The Spencers Retail Limited is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  8,645  in Spencers Retail Limited on September 28, 2024 and sell it today you would lose (440.00) from holding Spencers Retail Limited or give up 5.09% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

NRB Industrial Bearings  vs.  Spencers Retail Limited

 Performance 
       Timeline  
NRB Industrial Bearings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days NRB Industrial Bearings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Spencers Retail 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Spencers Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

NRB Industrial and Spencers Retail Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NRB Industrial and Spencers Retail

The main advantage of trading using opposite NRB Industrial and Spencers Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRB Industrial position performs unexpectedly, Spencers Retail 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 Spencers Retail will offset losses from the drop in Spencers Retail's long position.
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The idea behind NRB Industrial Bearings and Spencers Retail Limited 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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