Correlation Between First Graphene and NanoXplore

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

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

Diversification Opportunities for First Graphene and NanoXplore

0.62

Correlation Coefficient

First Graphene  NanoXplore

Poor diversification

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

Pair Corralation between First Graphene and NanoXplore

Assuming the 90 days horizon First Graphene is expected to generate 4.55 times more return on investment than NanoXplore. However, First Graphene is 4.55 times more volatile than NanoXplore. It trades about 0.14 of its potential returns per unit of risk. NanoXplore is currently generating about 0.04 per unit of risk. If you would invest  2.00  in First Graphene on December 2, 2024 and sell it today you would earn a total of  1.69  from holding First Graphene or generate 84.5% return on investment over 90 days.

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

First Graphene  vs.  NanoXplore

First Graphene

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Graphene are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, First Graphene reported solid returns over the last few months and may actually be approaching a breakup point.

NanoXplore

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NanoXplore are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NanoXplore is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with First Graphene and NanoXplore

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

The idea behind First Graphene and NanoXplore 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.