Correlation Between NKEQ and NKEL
Can any of the company-specific risk be diversified away by investing in both NKEQ and NKEL 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 NKEQ and NKEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NKEQ and NKEL, you can compare the effects of market volatilities on NKEQ and NKEL 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 NKEQ with a short position of NKEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of NKEQ and NKEL.
Diversification Opportunities for NKEQ and NKEL
Pay attention - limited upside
The 3 months correlation between NKEQ and NKEL is -1.0. Overlapping area represents the amount of risk that can be diversified away by holding NKEQ and NKEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NKEL and NKEQ 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 NKEQ are associated (or correlated) with NKEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NKEL has no effect on the direction of NKEQ i.e., NKEQ and NKEL go up and down completely randomly.
Pair Corralation between NKEQ and NKEL
If you would invest 2,060 in NKEL on September 14, 2024 and sell it today you would earn a total of 0.00 from holding NKEL or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NKEQ vs. NKEL
Performance |
| Timeline |
| NKEQ |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| NKEL |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
NKEQ and NKEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NKEQ and NKEL
The main advantage of trading using opposite NKEQ and NKEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NKEQ position performs unexpectedly, NKEL 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 NKEL will offset losses from the drop in NKEL's long position.The idea behind NKEQ and NKEL 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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