Correlation Between IXE Select and NuRAN Wireless

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

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

Diversification Opportunities for IXE Select and NuRAN Wireless

0.6

Correlation Coefficient

IXE Select  NuRAN Wireless

Poor diversification

The 3 months correlation between IXE and NuRAN is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding IXE Select Sector and NuRAN Wireless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuRAN Wireless and IXE Select 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 IXE Select Sector are associated (or correlated) with NuRAN Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuRAN Wireless has no effect on the direction of IXE Select i.e., IXE Select and NuRAN Wireless go up and down completely randomly.

Pair Corralation between IXE Select and NuRAN Wireless

Assuming the 90 days trading horizon IXE Select Sector is expected to generate 0.18 times more return on investment than NuRAN Wireless. However, IXE Select Sector is 5.65 times less risky than NuRAN Wireless. It trades about 0.02 of its potential returns per unit of risk. NuRAN Wireless is currently generating about -0.03 per unit of risk. If you would invest  88,523  in IXE Select Sector on October 7, 2024 and sell it today you would earn a total of  3,659  from holding IXE Select Sector or generate 4.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.56%
Values	Daily Returns

IXE Select Sector  vs.  NuRAN Wireless

Pair Trading with IXE Select and NuRAN Wireless

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

The idea behind IXE Select Sector and NuRAN Wireless 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 Stocks Directory module to find actively traded stocks across global markets.