Correlation Between NEM and NEO
Can any of the company-specific risk be diversified away by investing in both NEM and NEO 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 NEM and NEO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEM and NEO, you can compare the effects of market volatilities on NEM and NEO 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 NEM with a short position of NEO. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEM and NEO.
Diversification Opportunities for NEM and NEO
Very weak diversification
The 3 months correlation between NEM and NEO is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding NEM and NEO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEO and NEM 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 NEM are associated (or correlated) with NEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEO has no effect on the direction of NEM i.e., NEM and NEO go up and down completely randomly.
Pair Corralation between NEM and NEO
Assuming the 90 days trading horizon NEM is expected to generate 13.63 times less return on investment than NEO. But when comparing it to its historical volatility, NEM is 1.08 times less risky than NEO. It trades about 0.01 of its potential returns per unit of risk. NEO is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,270 in NEO on January 20, 2024 and sell it today you would earn a total of 594.00 from holding NEO or generate 46.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NEM vs. NEO
Performance |
| Timeline |
| NEM |
| NEO |
NEM and NEO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NEM and NEO
The main advantage of trading using opposite NEM and NEO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEM position performs unexpectedly, NEO 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 NEO will offset losses from the drop in NEO's long position.The idea behind NEM and NEO 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
Other Complementary Tools
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| CEOs Directory Screen CEOs from public companies around the world |