Correlation Between NEO and Hive
Can any of the company-specific risk be diversified away by investing in both NEO and Hive 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 Hive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEO and Hive, you can compare the effects of market volatilities on NEO and Hive 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 Hive. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEO and Hive.
Diversification Opportunities for NEO and Hive
Very weak diversification
The 3 months correlation between NEO and Hive is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding NEO and Hive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hive 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 Hive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hive has no effect on the direction of NEO i.e., NEO and Hive go up and down completely randomly.
Pair Corralation between NEO and Hive
Assuming the 90 days trading horizon NEO is expected to generate 1.37 times more return on investment than Hive. However, NEO is 1.37 times more volatile than Hive. It trades about 0.08 of its potential returns per unit of risk. Hive is currently generating about -0.17 per unit of risk. If you would invest 1,625 in NEO on January 27, 2024 and sell it today you would earn a total of 138.00 from holding NEO or generate 8.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
NEO vs. Hive
Performance |
Timeline |
NEO |
Hive |
NEO and Hive Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NEO and Hive
The main advantage of trading using opposite NEO and Hive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEO position performs unexpectedly, Hive 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 Hive will offset losses from the drop in Hive's long position.The idea behind NEO and Hive 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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