Correlation Between NEM and NEXO
Can any of the company-specific risk be diversified away by investing in both NEM and NEXO 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 NEXO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEM and NEXO, you can compare the effects of market volatilities on NEM and NEXO 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 NEXO. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEM and NEXO.
Diversification Opportunities for NEM and NEXO
Poor diversification
The 3 months correlation between NEM and NEXO is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding NEM and NEXO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXO 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 NEXO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXO has no effect on the direction of NEM i.e., NEM and NEXO go up and down completely randomly.
Pair Corralation between NEM and NEXO
Assuming the 90 days trading horizon NEM is expected to generate 2.13 times less return on investment than NEXO. In addition to that, NEM is 1.61 times more volatile than NEXO. It trades about 0.01 of its total potential returns per unit of risk. NEXO is currently generating about 0.04 per unit of volatility. If you would invest 116.00 in NEXO on January 20, 2024 and sell it today you would earn a total of 5.00 from holding NEXO or generate 4.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NEM vs. NEXO
Performance |
| Timeline |
| NEM |
| NEXO |
NEM and NEXO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NEM and NEXO
The main advantage of trading using opposite NEM and NEXO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEM position performs unexpectedly, NEXO 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 NEXO will offset losses from the drop in NEXO's long position.The idea behind NEM and NEXO 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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