Correlation Between NEXO and True USD

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

Diversification Opportunities for NEXO and True USD

0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between NEXO and True is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding NEXO and True USD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on True USD 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 True USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of True USD has no effect on the direction of NEXO i.e., NEXO and True USD go up and down completely randomly.

Pair Corralation between NEXO and True USD

Assuming the 90 days trading horizon NEXO is expected to generate 10.12 times more return on investment than True USD. However, NEXO is 10.12 times more volatile than True USD. It trades about 0.06 of its potential returns per unit of risk. True USD is currently generating about 0.0 per unit of risk. If you would invest  65.00  in NEXO on December 29, 2023 and sell it today you would earn a total of  68.00  from holding NEXO or generate 104.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

NEXO  vs.  True USD

 Performance 
       Timeline  
NEXO 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in NEXO are ranked lower than 14 (%) 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.
True USD 

Risk-Adjusted Performance

0 of 100

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

NEXO and True USD Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NEXO and True USD

The main advantage of trading using opposite NEXO and True USD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEXO position performs unexpectedly, True USD 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 True USD will offset losses from the drop in True USD's long position.
The idea behind NEXO and True USD 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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