Correlation Between NEM and Maker

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

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

Diversification Opportunities for NEM and Maker

0.46

Correlation Coefficient

NEM  Maker

Very weak diversification

The 3 months correlation between NEM and Maker is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding NEM and Maker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maker 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 Maker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maker has no effect on the direction of NEM i.e., NEM and Maker go up and down completely randomly.

Pair Corralation between NEM and Maker

Assuming the 90 days trading horizon NEM is expected to generate 1.88 times less return on investment than Maker. In addition to that, NEM is 1.17 times more volatile than Maker. It trades about 0.05 of its total potential returns per unit of risk. Maker is currently generating about 0.12 per unit of volatility. If you would invest  128,326  in Maker on January 24, 2024 and sell it today you would earn a total of  153,638  from holding Maker or generate 119.72% return on investment over 90 days.

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

NEM  vs.  Maker

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.

Maker

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Maker are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Maker exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEM and Maker

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

The idea behind NEM and Maker 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.