Correlation Between Aumann AG and NGK Insulators

Can any of the company-specific risk be diversified away by investing in both Aumann AG and NGK Insulators 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 Aumann AG and NGK Insulators into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aumann AG and NGK Insulators, you can compare the effects of market volatilities on Aumann AG and NGK Insulators 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 Aumann AG with a short position of NGK Insulators. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aumann AG and NGK Insulators.

Diversification Opportunities for Aumann AG and NGK Insulators

-0.11

Correlation Coefficient

Aumann AG  NGK Insulators

Good diversification

The 3 months correlation between Aumann and NGK is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Aumann AG and NGK Insulators in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGK Insulators and Aumann AG 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 Aumann AG are associated (or correlated) with NGK Insulators. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGK Insulators has no effect on the direction of Aumann AG i.e., Aumann AG and NGK Insulators go up and down completely randomly.

Pair Corralation between Aumann AG and NGK Insulators

Assuming the 90 days horizon Aumann AG is expected to under-perform the NGK Insulators. In addition to that, Aumann AG is 4.17 times more volatile than NGK Insulators. It trades about -0.12 of its total potential returns per unit of risk. NGK Insulators is currently generating about 0.28 per unit of volatility. If you would invest  1,310  in NGK Insulators on February 3, 2024 and sell it today you would earn a total of  35.00  from holding NGK Insulators or generate 2.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Aumann AG  vs.  NGK Insulators

Aumann AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aumann AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Aumann AG is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

NGK Insulators

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NGK Insulators are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, NGK Insulators may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Aumann AG and NGK Insulators

The main advantage of trading using opposite Aumann AG and NGK Insulators positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aumann AG position performs unexpectedly, NGK Insulators 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 NGK Insulators will offset losses from the drop in NGK Insulators' long position.

The idea behind Aumann AG and NGK Insulators 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.