Correlation Between Nauticus Robotics and East West

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

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

Diversification Opportunities for Nauticus Robotics and East West

-0.39

Correlation Coefficient

Nauticus Robotics  East West

Very good diversification

The 3 months correlation between Nauticus and East is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nauticus Robotics and East West Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East West Petroleum and Nauticus Robotics 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 Nauticus Robotics are associated (or correlated) with East West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East West Petroleum has no effect on the direction of Nauticus Robotics i.e., Nauticus Robotics and East West go up and down completely randomly.

Pair Corralation between Nauticus Robotics and East West

Assuming the 90 days horizon Nauticus Robotics is expected to generate 11.86 times less return on investment than East West. But when comparing it to its historical volatility, Nauticus Robotics is 2.33 times less risky than East West. It trades about 0.04 of its potential returns per unit of risk. East West Petroleum is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2.33  in East West Petroleum on September 23, 2024 and sell it today you would earn a total of  0.67  from holding East West Petroleum or generate 28.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.76%
Values	Daily Returns

Nauticus Robotics  vs.  East West Petroleum

Nauticus Robotics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nauticus Robotics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Nauticus Robotics showed solid returns over the last few months and may actually be approaching a breakup point.

East West Petroleum

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in East West Petroleum are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, East West reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nauticus Robotics and East West

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

The idea behind Nauticus Robotics and East West Petroleum 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.