Correlation Between Shipping and NRB Industrial
Can any of the company-specific risk be diversified away by investing in both Shipping 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 Shipping and NRB Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shipping and NRB Industrial Bearings, you can compare the effects of market volatilities on Shipping 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 Shipping with a short position of NRB Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shipping and NRB Industrial.
Diversification Opportunities for Shipping and NRB Industrial
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Shipping and NRB is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Shipping 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 Shipping 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 Shipping 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 Shipping i.e., Shipping and NRB Industrial go up and down completely randomly.
Pair Corralation between Shipping and NRB Industrial
Assuming the 90 days trading horizon Shipping is expected to generate 1.1 times more return on investment than NRB Industrial. However, Shipping is 1.1 times more volatile than NRB Industrial Bearings. It trades about 0.06 of its potential returns per unit of risk. NRB Industrial Bearings is currently generating about -0.03 per unit of risk. If you would invest 16,075 in Shipping on September 3, 2024 and sell it today you would earn a total of 7,412 from holding Shipping or generate 46.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.18% |
| Values | Daily Returns |
Shipping vs. NRB Industrial Bearings
Performance |
| Timeline |
| Shipping |
| NRB Industrial Bearings |
Shipping and NRB Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shipping and NRB Industrial
The main advantage of trading using opposite Shipping and NRB Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shipping 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.| Shipping vs. Sintex Plastics Technology | Shipping vs. Shyam Metalics and | Shipping vs. Hilton Metal Forging | Shipping vs. Sonata Software Limited |
| NRB Industrial vs. Tata Consultancy Services | NRB Industrial vs. Reliance Industries Limited | NRB Industrial vs. Wipro Limited | NRB Industrial vs. Shipping |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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