Correlation Between Nano and Venus

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

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

Diversification Opportunities for Nano and Venus

0.85

Correlation Coefficient

Nano  Venus

Very poor diversification

The 3 months correlation between Nano and Venus is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Nano and Venus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Venus and Nano 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 Nano are associated (or correlated) with Venus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Venus has no effect on the direction of Nano i.e., Nano and Venus go up and down completely randomly.

Pair Corralation between Nano and Venus

Assuming the 90 days trading horizon Nano is expected to generate 1.32 times less return on investment than Venus. But when comparing it to its historical volatility, Nano is 1.27 times less risky than Venus. It trades about 0.1 of its potential returns per unit of risk. Venus is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  546.00  in Venus on January 30, 2024 and sell it today you would earn a total of  477.00  from holding Venus or generate 87.36% return on investment over 90 days.

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

Nano  vs.  Venus

Nano

Risk-Adjusted Performance

2 of 100

Weak

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

Venus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Venus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Venus is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nano and Venus

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

The idea behind Nano and Venus 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.