Correlation Between Ducommun Incorporated and National Presto

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

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

Diversification Opportunities for Ducommun Incorporated and National Presto

0.51

Correlation Coefficient

Ducommun Incorporated  National Presto

Very weak diversification

The 3 months correlation between Ducommun and National is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ducommun Incorporated and National Presto Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Presto Indu and Ducommun Incorporated 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 Ducommun Incorporated are associated (or correlated) with National Presto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Presto Indu has no effect on the direction of Ducommun Incorporated i.e., Ducommun Incorporated and National Presto go up and down completely randomly.

Pair Corralation between Ducommun Incorporated and National Presto

Considering the 90-day investment horizon Ducommun Incorporated is expected to generate 1.75 times less return on investment than National Presto. In addition to that, Ducommun Incorporated is 1.18 times more volatile than National Presto Industries. It trades about 0.01 of its total potential returns per unit of risk. National Presto Industries is currently generating about 0.02 per unit of volatility. If you would invest  7,435  in National Presto Industries on August 23, 2024 and sell it today you would earn a total of  120.00  from holding National Presto Industries or generate 1.61% return on investment over 90 days.

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

Ducommun Incorporated  vs.  National Presto Industries

Ducommun Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ducommun Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Ducommun Incorporated is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

National Presto Indu

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Presto Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, National Presto is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ducommun Incorporated and National Presto

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

The idea behind Ducommun Incorporated and National Presto Industries 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.