Correlation Between NEM and LEND

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

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

Diversification Opportunities for NEM and LEND

-0.06

Correlation Coefficient

NEM  LEND

Good diversification

The 3 months correlation between NEM and LEND is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding NEM and LEND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEND 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 LEND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEND has no effect on the direction of NEM i.e., NEM and LEND go up and down completely randomly.

Pair Corralation between NEM and LEND

Assuming the 90 days trading horizon NEM is expected to under-perform the LEND. But the crypto coin apears to be less risky and, when comparing its historical volatility, NEM is 37.39 times less risky than LEND. The crypto coin trades about -0.21 of its potential returns per unit of risk. The LEND is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  0.00  in LEND on January 24, 2024 and sell it today you would earn a total of  127.00  from holding LEND or generate 9.223372036854776E16% return on investment over 90 days.

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

NEM  vs.  LEND

NEM

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NEM are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, NEM may actually be approaching a critical reversion point that can send shares even higher in May 2024.

LEND

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LEND are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, LEND exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEM and LEND

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

The idea behind NEM and LEND 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.