Correlation Between Near and IQ

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

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

Diversification Opportunities for Near and IQ

0.72

Correlation Coefficient

Near  IQ

Poor diversification

The 3 months correlation between Near and IQ is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Near and IQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ and Near 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 Near are associated (or correlated) with IQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ has no effect on the direction of Near i.e., Near and IQ go up and down completely randomly.

Pair Corralation between Near and IQ

Assuming the 90 days trading horizon Near is expected to under-perform the IQ. In addition to that, Near is 1.26 times more volatile than IQ. It trades about -0.22 of its total potential returns per unit of risk. IQ is currently generating about 0.01 per unit of volatility. If you would invest  0.59  in IQ on August 4, 2024 and sell it today you would lose  0.00  from holding IQ or give up 0.34% of portfolio value over 90 days.

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

Near  vs.  IQ

Near

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Near are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Near exhibited solid returns over the last few months and may actually be approaching a breakup point.

IQ

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IQ are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, IQ exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Near and IQ

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

The idea behind Near and IQ 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.