Correlation Between Nano and DAT

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

By analyzing existing cross correlation between Nano and DAT, you can compare the effects of market volatilities on Nano and DAT 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 DAT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nano and DAT.

Diversification Opportunities for Nano and DAT

-0.13

Correlation Coefficient

Nano  DAT

Good diversification

The 3 months correlation between Nano and DAT is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Nano and DAT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAT 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 DAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAT has no effect on the direction of Nano i.e., Nano and DAT go up and down completely randomly.

Pair Corralation between Nano and DAT

Assuming the 90 days trading horizon Nano is expected to generate 1.62 times more return on investment than DAT. However, Nano is 1.62 times more volatile than DAT. It trades about 0.02 of its potential returns per unit of risk. DAT is currently generating about -0.01 per unit of risk. If you would invest  139.00  in Nano on January 29, 2024 and sell it today you would lose (22.00) from holding Nano or give up 15.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.29%
Values	Daily Returns

Nano  vs.  DAT

Nano

Risk-Adjusted Performance

2 of 100

Weak

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

DAT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DAT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, DAT is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nano and DAT

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

The idea behind Nano and DAT 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.