Correlation Between NEM and VeChain

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Can any of the company-specific risk be diversified away by investing in both NEM and VeChain 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 VeChain into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEM and VeChain, you can compare the effects of market volatilities on NEM and VeChain 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 VeChain. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEM and VeChain.

Diversification Opportunities for NEM and VeChain

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between NEM and VeChain is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding NEM and VeChain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VeChain 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 VeChain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VeChain has no effect on the direction of NEM i.e., NEM and VeChain go up and down completely randomly.

Pair Corralation between NEM and VeChain

Assuming the 90 days trading horizon NEM is expected to generate 1.37 times more return on investment than VeChain. However, NEM is 1.37 times more volatile than VeChain. It trades about 0.17 of its potential returns per unit of risk. VeChain is currently generating about -0.06 per unit of risk. If you would invest  4.00  in NEM on December 29, 2023 and sell it today you would earn a total of  1.09  from holding NEM or generate 27.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

NEM  vs.  VeChain

 Performance 
       Timeline  
NEM 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NEM are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, NEM exhibited solid returns over the last few months and may actually be approaching a breakup point.
VeChain 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in VeChain are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, VeChain exhibited solid returns over the last few months and may actually be approaching a breakup point.

NEM and VeChain Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NEM and VeChain

The main advantage of trading using opposite NEM and VeChain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEM position performs unexpectedly, VeChain 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 VeChain will offset losses from the drop in VeChain's long position.
The idea behind NEM and VeChain 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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