Correlation Between SNC and Nano

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

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

Diversification Opportunities for SNC and Nano

0.41

Correlation Coefficient

SNC  Nano

Very weak diversification

The 3 months correlation between SNC and Nano is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding SNC and Nano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nano and SNC 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 SNC are associated (or correlated) with Nano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nano has no effect on the direction of SNC i.e., SNC and Nano go up and down completely randomly.

Pair Corralation between SNC and Nano

Assuming the 90 days trading horizon SNC is expected to generate 0.99 times more return on investment than Nano. However, SNC is 1.01 times less risky than Nano. It trades about 0.09 of its potential returns per unit of risk. Nano is currently generating about 0.05 per unit of risk. If you would invest  2.29  in SNC on January 30, 2024 and sell it today you would earn a total of  3.96  from holding SNC or generate 172.93% return on investment over 90 days.

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

SNC  vs.  Nano

SNC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SNC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SNC exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with SNC and Nano

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

The idea behind SNC and Nano 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.