Correlation Between Morguard North and Nexus Real

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

By analyzing existing cross correlation between Morguard North American and Nexus Real Estate, you can compare the effects of market volatilities on Morguard North and Nexus Real 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 Morguard North with a short position of Nexus Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morguard North and Nexus Real.

Diversification Opportunities for Morguard North and Nexus Real

0.76

Correlation Coefficient

Morguard North  Nexus Real

Poor diversification

The 3 months correlation between Morguard and Nexus is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Morguard North American and Nexus Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexus Real Estate and Morguard North 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 Morguard North American are associated (or correlated) with Nexus Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexus Real Estate has no effect on the direction of Morguard North i.e., Morguard North and Nexus Real go up and down completely randomly.

Pair Corralation between Morguard North and Nexus Real

Assuming the 90 days trading horizon Morguard North American is expected to generate 1.13 times more return on investment than Nexus Real. However, Morguard North is 1.13 times more volatile than Nexus Real Estate. It trades about 0.0 of its potential returns per unit of risk. Nexus Real Estate is currently generating about -0.05 per unit of risk. If you would invest  1,842  in Morguard North American on September 5, 2024 and sell it today you would lose (11.00) from holding Morguard North American or give up 0.6% of portfolio value over 90 days.

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

Morguard North American  vs.  Nexus Real Estate

Morguard North American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morguard North American has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Morguard North is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nexus Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nexus Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nexus Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morguard North and Nexus Real

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

The idea behind Morguard North American and Nexus Real Estate 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.