Correlation Between Nsx and Xero
Can any of the company-specific risk be diversified away by investing in both Nsx and Xero 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 Nsx and Xero into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nsx and Xero, you can compare the effects of market volatilities on Nsx and Xero 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 Nsx with a short position of Xero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nsx and Xero.
Diversification Opportunities for Nsx and Xero
Significant diversification
The 3 months correlation between Nsx and Xero is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Nsx and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero and Nsx 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 Nsx are associated (or correlated) with Xero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xero has no effect on the direction of Nsx i.e., Nsx and Xero go up and down completely randomly.
Pair Corralation between Nsx and Xero
Assuming the 90 days trading horizon Nsx is expected to generate 1.54 times less return on investment than Xero. In addition to that, Nsx is 3.33 times more volatile than Xero. It trades about 0.02 of its total potential returns per unit of risk. Xero is currently generating about 0.12 per unit of volatility. If you would invest 10,054 in Xero on September 14, 2024 and sell it today you would earn a total of 6,847 from holding Xero or generate 68.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Nsx vs. Xero
Performance |
| Timeline |
| Nsx |
| Xero |
Nsx and Xero Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nsx and Xero
The main advantage of trading using opposite Nsx and Xero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nsx position performs unexpectedly, Xero 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 Xero will offset losses from the drop in Xero's long position.| Nsx vs. Aneka Tambang Tbk | Nsx vs. National Australia Bank | Nsx vs. Commonwealth Bank of | Nsx vs. Commonwealth Bank of |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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