Correlation Between NAPCO Security and Mistras

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

By analyzing existing cross correlation between NAPCO Security Technologies and Mistras Group, you can compare the effects of market volatilities on NAPCO Security and Mistras 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 NAPCO Security with a short position of Mistras. Check out your portfolio center. Please also check ongoing floating volatility patterns of NAPCO Security and Mistras.

Diversification Opportunities for NAPCO Security and Mistras

0.07

Correlation Coefficient

NAPCO Security  Mistras

Significant diversification

The 3 months correlation between NAPCO and Mistras is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NAPCO Security Technologies and Mistras Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mistras Group and NAPCO Security 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 NAPCO Security Technologies are associated (or correlated) with Mistras. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mistras Group has no effect on the direction of NAPCO Security i.e., NAPCO Security and Mistras go up and down completely randomly.

Pair Corralation between NAPCO Security and Mistras

Given the investment horizon of 90 days NAPCO Security Technologies is expected to generate 1.31 times more return on investment than Mistras. However, NAPCO Security is 1.31 times more volatile than Mistras Group. It trades about 0.24 of its potential returns per unit of risk. Mistras Group is currently generating about 0.18 per unit of risk. If you would invest  1,831  in NAPCO Security Technologies on January 26, 2024 and sell it today you would earn a total of  2,569  from holding NAPCO Security Technologies or generate 140.31% return on investment over 90 days.

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

NAPCO Security Technologies  vs.  Mistras Group

NAPCO Security Techn

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NAPCO Security Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, NAPCO Security exhibited solid returns over the last few months and may actually be approaching a breakup point.

Mistras Group

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mistras Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Mistras reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NAPCO Security and Mistras

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

The idea behind NAPCO Security Technologies and Mistras Group 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.