Correlation Between Nano and Amp
Can any of the company-specific risk be diversified away by investing in both Nano and Amp 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 Nano and Amp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nano and Amp, you can compare the effects of market volatilities on Nano and Amp 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 Nano with a short position of Amp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nano and Amp.
Diversification Opportunities for Nano and Amp
Very poor diversification
The 3 months correlation between Nano and Amp is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Nano and Amp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amp and Nano 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 Nano are associated (or correlated) with Amp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amp has no effect on the direction of Nano i.e., Nano and Amp go up and down completely randomly.
Pair Corralation between Nano and Amp
Assuming the 90 days trading horizon Nano is expected to generate 1.08 times less return on investment than Amp. But when comparing it to its historical volatility, Nano is 1.38 times less risky than Amp. It trades about 0.03 of its potential returns per unit of risk. Amp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1.34 in Amp on December 30, 2023 and sell it today you would lose (0.29) from holding Amp or give up 21.64% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Nano vs. Amp
Performance |
Timeline |
Nano |
Amp |
Nano and Amp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nano and Amp
The main advantage of trading using opposite Nano and Amp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nano position performs unexpectedly, Amp 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 Amp will offset losses from the drop in Amp's long position.The idea behind Nano and Amp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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