Correlation Between NEXO and VEST

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

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

Diversification Opportunities for NEXO and VEST

-0.66

Correlation Coefficient

NEXO  VEST

Excellent diversification

The 3 months correlation between NEXO and VEST is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding NEXO and VEST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VEST 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 VEST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VEST has no effect on the direction of NEXO i.e., NEXO and VEST go up and down completely randomly.

Pair Corralation between NEXO and VEST

Assuming the 90 days trading horizon NEXO is expected to generate 1.25 times more return on investment than VEST. However, NEXO is 1.25 times more volatile than VEST. It trades about 0.0 of its potential returns per unit of risk. VEST is currently generating about -0.01 per unit of risk. If you would invest  190.00  in NEXO on January 26, 2024 and sell it today you would lose (66.00) from holding NEXO or give up 34.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	70.76%
Values	Daily Returns

NEXO  vs.  VEST

NEXO

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NEXO are ranked lower than 12 (%) 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.

VEST

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NEXO and VEST

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

The idea behind NEXO and VEST 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.