Correlation Between National Fuel and Travis Perkins

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

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

Diversification Opportunities for National Fuel and Travis Perkins

0.8

Correlation Coefficient

National Fuel  Travis Perkins

Very poor diversification

The 3 months correlation between National and Travis is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding National Fuel Gas and Travis Perkins PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travis Perkins PLC and National Fuel 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 Fuel Gas are associated (or correlated) with Travis Perkins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Travis Perkins PLC has no effect on the direction of National Fuel i.e., National Fuel and Travis Perkins go up and down completely randomly.

Pair Corralation between National Fuel and Travis Perkins

Considering the 90-day investment horizon National Fuel Gas is expected to under-perform the Travis Perkins. But the stock apears to be less risky and, when comparing its historical volatility, National Fuel Gas is 1.27 times less risky than Travis Perkins. The stock trades about 0.0 of its potential returns per unit of risk. The Travis Perkins PLC is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  992.00  in Travis Perkins PLC on March 13, 2024 and sell it today you would earn a total of  90.00  from holding Travis Perkins PLC or generate 9.07% return on investment over 90 days.

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

National Fuel Gas  vs.  Travis Perkins PLC

National Fuel Gas

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Fuel Gas are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, National Fuel may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Travis Perkins PLC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Travis Perkins PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward-looking signals, Travis Perkins showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Fuel and Travis Perkins

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

The idea behind National Fuel Gas and Travis Perkins PLC 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.