Correlation Between NEM and VEST

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

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

Diversification Opportunities for NEM and VEST

-0.43

Correlation Coefficient

NEM  VEST

Very good diversification

The 3 months correlation between NEM and VEST is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding NEM and VEST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VEST 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 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 NEM i.e., NEM and VEST go up and down completely randomly.

Pair Corralation between NEM and VEST

If you would invest  0.13  in VEST on January 25, 2024 and sell it today you would earn a total of  0.00  from holding VEST or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.35%
Values	Daily Returns

NEM  vs.  VEST

NEM

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NEM are ranked lower than 1 (%) 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.

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 NEM and VEST

The main advantage of trading using opposite NEM and VEST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEM 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 NEM 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.