Correlation Between Nervos Network and EM

Can any of the company-specific risk be diversified away by investing in both Nervos Network and EM 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 Nervos Network and EM into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nervos Network and EM, you can compare the effects of market volatilities on Nervos Network and EM 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 Nervos Network with a short position of EM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nervos Network and EM.

Diversification Opportunities for Nervos Network and EM

0.45

Correlation Coefficient

Nervos Network  EM

Very weak diversification

The 3 months correlation between Nervos and EM is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Nervos Network and EM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EM and Nervos Network 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 Nervos Network are associated (or correlated) with EM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EM has no effect on the direction of Nervos Network i.e., Nervos Network and EM go up and down completely randomly.

Pair Corralation between Nervos Network and EM

Assuming the 90 days trading horizon Nervos Network is expected to generate 2.43 times more return on investment than EM. However, Nervos Network is 2.43 times more volatile than EM. It trades about 0.07 of its potential returns per unit of risk. EM is currently generating about -0.01 per unit of risk. If you would invest  1.52  in Nervos Network on January 29, 2024 and sell it today you would earn a total of  0.17  from holding Nervos Network or generate 11.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Nervos Network  vs.  EM

Nervos Network

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nervos Network are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Nervos Network exhibited solid returns over the last few months and may actually be approaching a breakup point.

EM

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EM are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, EM may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Nervos Network and EM

The main advantage of trading using opposite Nervos Network and EM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nervos Network position performs unexpectedly, EM 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 EM will offset losses from the drop in EM's long position.

The idea behind Nervos Network and EM 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.