Correlation Between Direct Equity and Nukkleus

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

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

Diversification Opportunities for Direct Equity and Nukkleus

-0.14

Correlation Coefficient

Direct Equity  Nukkleus

Good diversification

The 3 months correlation between Direct and Nukkleus is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Direct Equity International and Nukkleus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nukkleus and Direct Equity 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 Direct Equity International are associated (or correlated) with Nukkleus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nukkleus has no effect on the direction of Direct Equity i.e., Direct Equity and Nukkleus go up and down completely randomly.

Pair Corralation between Direct Equity and Nukkleus

Given the investment horizon of 90 days Direct Equity International is expected to generate 2.35 times more return on investment than Nukkleus. However, Direct Equity is 2.35 times more volatile than Nukkleus. It trades about 0.15 of its potential returns per unit of risk. Nukkleus is currently generating about -0.06 per unit of risk. If you would invest  0.01  in Direct Equity International on December 3, 2024 and sell it today you would earn a total of  0.02  from holding Direct Equity International or generate 200.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.02%
Values	Daily Returns

Direct Equity International  vs.  Nukkleus

Direct Equity Intern

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direct Equity International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Direct Equity demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Nukkleus

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nukkleus are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating forward-looking signals, Nukkleus disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direct Equity and Nukkleus

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

The idea behind Direct Equity International and Nukkleus 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.