Correlation Between National Western and Marchex

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

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

Diversification Opportunities for National Western and Marchex

0.36

Correlation Coefficient

National Western  Marchex

Weak diversification

The 3 months correlation between National and Marchex is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding National Western Life and Marchex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marchex and National Western 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 Western Life are associated (or correlated) with Marchex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marchex has no effect on the direction of National Western i.e., National Western and Marchex go up and down completely randomly.

Pair Corralation between National Western and Marchex

Given the investment horizon of 90 days National Western Life is expected to generate 0.06 times more return on investment than Marchex. However, National Western Life is 18.09 times less risky than Marchex. It trades about -0.18 of its potential returns per unit of risk. Marchex is currently generating about -0.07 per unit of risk. If you would invest  49,270  in National Western Life on February 3, 2024 and sell it today you would lose (380.00) from holding National Western Life or give up 0.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

National Western Life  vs.  Marchex

National Western Life

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Western Life are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong essential indicators, National Western is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Marchex

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marchex are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Marchex is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with National Western and Marchex

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

The idea behind National Western Life and Marchex 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.