Correlation Between NANO and XMX
Can any of the company-specific risk be diversified away by investing in both NANO and XMX 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 NANO and XMX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NANO and XMX, you can compare the effects of market volatilities on NANO and XMX 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 NANO with a short position of XMX. Check out your portfolio center. Please also check ongoing floating volatility patterns of NANO and XMX.
Diversification Opportunities for NANO and XMX
Good diversification
The 3 months correlation between NANO and XMX is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding NANO and XMX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XMX and NANO 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 NANO are associated (or correlated) with XMX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XMX has no effect on the direction of NANO i.e., NANO and XMX go up and down completely randomly.
Pair Corralation between NANO and XMX
Assuming the 90 days trading horizon NANO is expected to generate 0.55 times more return on investment than XMX. However, NANO is 1.82 times less risky than XMX. It trades about 0.35 of its potential returns per unit of risk. XMX is currently generating about 0.15 per unit of risk. If you would invest 80.00 in NANO on August 25, 2024 and sell it today you would earn a total of 27.00 from holding NANO or generate 33.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NANO vs. XMX
Performance |
| Timeline |
| NANO |
| XMX |
NANO and XMX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NANO and XMX
The main advantage of trading using opposite NANO and XMX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NANO position performs unexpectedly, XMX 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 XMX will offset losses from the drop in XMX's long position.The idea behind NANO and XMX 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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