Correlation Between NXS and DGTX
Can any of the company-specific risk be diversified away by investing in both NXS and DGTX 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 NXS and DGTX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NXS and DGTX, you can compare the effects of market volatilities on NXS and DGTX 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 NXS with a short position of DGTX. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXS and DGTX.
Diversification Opportunities for NXS and DGTX
Poor diversification
The 3 months correlation between NXS and DGTX is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding NXS and DGTX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DGTX and NXS 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 NXS are associated (or correlated) with DGTX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DGTX has no effect on the direction of NXS i.e., NXS and DGTX go up and down completely randomly.
Pair Corralation between NXS and DGTX
Assuming the 90 days trading horizon NXS is expected to generate 0.35 times more return on investment than DGTX. However, NXS is 2.86 times less risky than DGTX. It trades about 0.37 of its potential returns per unit of risk. DGTX is currently generating about -0.07 per unit of risk. 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NXS vs. DGTX
Performance |
| Timeline |
| NXS |
| DGTX |
NXS and DGTX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NXS and DGTX
The main advantage of trading using opposite NXS and DGTX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NXS position performs unexpectedly, DGTX 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 DGTX will offset losses from the drop in DGTX's long position.The idea behind NXS and DGTX 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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