Correlation Between Nano and POCC

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

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

Diversification Opportunities for Nano and POCC

0.65

Correlation Coefficient

Nano  POCC

Poor diversification

The 3 months correlation between Nano and POCC is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Nano and POCC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POCC and Nano 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 Nano are associated (or correlated) with POCC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POCC has no effect on the direction of Nano i.e., Nano and POCC go up and down completely randomly.

Pair Corralation between Nano and POCC

Assuming the 90 days trading horizon Nano is expected to generate 2.5 times more return on investment than POCC. However, Nano is 2.5 times more volatile than POCC. It trades about 0.01 of its potential returns per unit of risk. POCC is currently generating about -0.12 per unit of risk. If you would invest  134.00  in Nano on November 27, 2024 and sell it today you would lose (27.00) from holding Nano or give up 20.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Nano  vs.  POCC

Nano

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nano has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady fundamental indicators, Nano may actually be approaching a critical reversion point that can send shares even higher in March 2025.

POCC

Risk-Adjusted Performance

Very Weak

Over the last 90 days POCC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for POCC shareholders.

Pair Trading with Nano and POCC

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

The idea behind Nano and POCC 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.