Correlation Between NEXO and Gatechain Token

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

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

Diversification Opportunities for NEXO and Gatechain Token

0.56

Correlation Coefficient

NEXO  Gatechain Token

Very weak diversification

The 3 months correlation between NEXO and Gatechain is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding NEXO and Gatechain Token in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gatechain Token and NEXO 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 NEXO are associated (or correlated) with Gatechain Token. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gatechain Token has no effect on the direction of NEXO i.e., NEXO and Gatechain Token go up and down completely randomly.

Pair Corralation between NEXO and Gatechain Token

Assuming the 90 days trading horizon NEXO is expected to generate 0.69 times more return on investment than Gatechain Token. However, NEXO is 1.46 times less risky than Gatechain Token. It trades about -0.11 of its potential returns per unit of risk. Gatechain Token is currently generating about -0.23 per unit of risk. If you would invest  135.00  in NEXO on January 27, 2024 and sell it today you would lose (12.00) from holding NEXO or give up 8.89% of portfolio value over 90 days.

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

NEXO  vs.  Gatechain Token

NEXO

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NEXO are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, NEXO exhibited solid returns over the last few months and may actually be approaching a breakup point.

Gatechain Token

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gatechain Token are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Gatechain Token exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEXO and Gatechain Token

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

The idea behind NEXO and Gatechain Token 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.