Correlation Between NEO and Dash

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Can any of the company-specific risk be diversified away by investing in both NEO and Dash 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 NEO and Dash into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEO and Dash, you can compare the effects of market volatilities on NEO and Dash 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 NEO with a short position of Dash. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEO and Dash.

Diversification Opportunities for NEO and Dash

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between NEO and Dash is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding NEO and Dash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dash and NEO 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 NEO are associated (or correlated) with Dash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dash has no effect on the direction of NEO i.e., NEO and Dash go up and down completely randomly.

Pair Corralation between NEO and Dash

Assuming the 90 days trading horizon NEO is expected to generate 1.08 times less return on investment than Dash. But when comparing it to its historical volatility, NEO is 1.11 times less risky than Dash. It trades about 0.17 of its potential returns per unit of risk. Dash is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,123  in Dash on December 29, 2023 and sell it today you would earn a total of  719.00  from holding Dash or generate 23.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

NEO  vs.  Dash

 Performance 
       Timeline  
NEO 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in NEO are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, NEO exhibited solid returns over the last few months and may actually be approaching a breakup point.
Dash 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Dash are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Dash exhibited solid returns over the last few months and may actually be approaching a breakup point.

NEO and Dash Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NEO and Dash

The main advantage of trading using opposite NEO and Dash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEO position performs unexpectedly, Dash 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 Dash will offset losses from the drop in Dash's long position.
The idea behind NEO and Dash 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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