Correlation Between National Research and Modern Mobility

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

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

Diversification Opportunities for National Research and Modern Mobility

0.35

Correlation Coefficient

National Research  Modern Mobility

Weak diversification

The 3 months correlation between National and Modern is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding National Research Corp and Modern Mobility Aids in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modern Mobility Aids and National Research 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 Research Corp are associated (or correlated) with Modern Mobility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modern Mobility Aids has no effect on the direction of National Research i.e., National Research and Modern Mobility go up and down completely randomly.

Pair Corralation between National Research and Modern Mobility

Considering the 90-day investment horizon National Research Corp is expected to under-perform the Modern Mobility. But the stock apears to be less risky and, when comparing its historical volatility, National Research Corp is 7.96 times less risky than Modern Mobility. The stock trades about -0.37 of its potential returns per unit of risk. The Modern Mobility Aids is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.50  in Modern Mobility Aids on January 16, 2025 and sell it today you would lose (0.10) from holding Modern Mobility Aids or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

National Research Corp  vs.  Modern Mobility Aids

National Research Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Research Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Modern Mobility Aids

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Modern Mobility Aids are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Modern Mobility displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Research and Modern Mobility

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

The idea behind National Research Corp and Modern Mobility Aids 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 Transaction History module to view history of all your transactions and understand their impact on performance.