Correlation Between 5E Advanced and Nano One

Can any of the company-specific risk be diversified away by investing in both 5E Advanced and Nano One 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 5E Advanced and Nano One into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 5E Advanced Materials and Nano One Materials, you can compare the effects of market volatilities on 5E Advanced and Nano One 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 5E Advanced with a short position of Nano One. Check out your portfolio center. Please also check ongoing floating volatility patterns of 5E Advanced and Nano One.

Diversification Opportunities for 5E Advanced and Nano One

0.59

Correlation Coefficient

5E Advanced  Nano One

Very weak diversification

The 3 months correlation between FEAM and Nano is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding 5E Advanced Materials and Nano One Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nano One Materials and 5E Advanced 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 5E Advanced Materials are associated (or correlated) with Nano One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nano One Materials has no effect on the direction of 5E Advanced i.e., 5E Advanced and Nano One go up and down completely randomly.

Pair Corralation between 5E Advanced and Nano One

Given the investment horizon of 90 days 5E Advanced Materials is expected to under-perform the Nano One. In addition to that, 5E Advanced is 1.73 times more volatile than Nano One Materials. It trades about -0.07 of its total potential returns per unit of risk. Nano One Materials is currently generating about -0.06 per unit of volatility. If you would invest  246.00  in Nano One Materials on December 1, 2024 and sell it today you would lose (198.00) from holding Nano One Materials or give up 80.49% of portfolio value over 90 days.

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

5E Advanced Materials  vs.  Nano One Materials

5E Advanced Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days 5E Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Nano One Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nano One Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with 5E Advanced and Nano One

The main advantage of trading using opposite 5E Advanced and Nano One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 5E Advanced position performs unexpectedly, Nano One 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 One will offset losses from the drop in Nano One's long position.

The idea behind 5E Advanced Materials and Nano One Materials 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.