Correlation Between NEXO and Binance Coin
Can any of the company-specific risk be diversified away by investing in both NEXO and Binance Coin 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 NEXO and Binance Coin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEXO and Binance Coin, you can compare the effects of market volatilities on NEXO and Binance Coin 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 NEXO with a short position of Binance Coin. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEXO and Binance Coin.
Diversification Opportunities for NEXO and Binance Coin
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NEXO and Binance is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding NEXO and Binance Coin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binance Coin and NEXO 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 NEXO are associated (or correlated) with Binance Coin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binance Coin has no effect on the direction of NEXO i.e., NEXO and Binance Coin go up and down completely randomly.
Pair Corralation between NEXO and Binance Coin
Assuming the 90 days trading horizon NEXO is expected to under-perform the Binance Coin. But the crypto coin apears to be less risky and, when comparing its historical volatility, NEXO is 1.04 times less risky than Binance Coin. The crypto coin trades about -0.12 of its potential returns per unit of risk. The Binance Coin is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 58,029 in Binance Coin on January 24, 2024 and sell it today you would earn a total of 2,201 from holding Binance Coin or generate 3.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NEXO vs. Binance Coin
Performance |
| Timeline |
| NEXO |
| Binance Coin |
NEXO and Binance Coin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NEXO and Binance Coin
The main advantage of trading using opposite NEXO and Binance Coin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEXO position performs unexpectedly, Binance Coin 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 Binance Coin will offset losses from the drop in Binance Coin's long position.The idea behind NEXO and Binance Coin 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.| Binance Coin vs. Staked Ether | Binance Coin vs. Cronos | Binance Coin vs. Wrapped Bitcoin | Binance Coin vs. Monero |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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