Correlation Between NEM and AION

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

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

Diversification Opportunities for NEM and AION

0.3

Correlation Coefficient

NEM  AION

Weak diversification

The 3 months correlation between NEM and AION is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding NEM and AION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AION and NEM 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 NEM are associated (or correlated) with AION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AION has no effect on the direction of NEM i.e., NEM and AION go up and down completely randomly.

Pair Corralation between NEM and AION

Assuming the 90 days trading horizon NEM is expected to under-perform the AION. But the crypto coin apears to be less risky and, when comparing its historical volatility, NEM is 15.47 times less risky than AION. The crypto coin trades about -0.18 of its potential returns per unit of risk. The AION is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  0.22  in AION on January 26, 2024 and sell it today you would earn a total of  0.31  from holding AION or generate 141.61% return on investment over 90 days.

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

NEM  vs.  AION

NEM

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days NEM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak primary indicators, NEM may actually be approaching a critical reversion point that can send shares even higher in May 2024.

AION

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AION are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, AION exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEM and AION

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

The idea behind NEM and AION 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.