Correlation Between Centrifuge and NXS
Can any of the company-specific risk be diversified away by investing in both Centrifuge and NXS 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 Centrifuge and NXS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Centrifuge and NXS, you can compare the effects of market volatilities on Centrifuge and NXS 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 Centrifuge with a short position of NXS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrifuge and NXS.
Diversification Opportunities for Centrifuge and NXS
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Centrifuge and NXS is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Centrifuge and NXS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXS and Centrifuge 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 Centrifuge are associated (or correlated) with NXS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXS has no effect on the direction of Centrifuge i.e., Centrifuge and NXS go up and down completely randomly.
Pair Corralation between Centrifuge and NXS
Assuming the 90 days trading horizon Centrifuge is expected to generate 1.25 times less return on investment than NXS. In addition to that, Centrifuge is 1.43 times more volatile than NXS. It trades about 0.21 of its total potential returns per unit of risk. NXS is currently generating about 0.37 per unit of volatility. If you would invest 16.00 in NXS on August 23, 2024 and sell it today you would earn a total of 7.00 from holding NXS or generate 43.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Centrifuge vs. NXS
Performance |
| Timeline |
| Centrifuge |
| NXS |
Centrifuge and NXS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Centrifuge and NXS
The main advantage of trading using opposite Centrifuge and NXS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrifuge position performs unexpectedly, NXS 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 NXS will offset losses from the drop in NXS's long position.The idea behind Centrifuge and NXS 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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