Correlation Between Near and DF

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

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

Diversification Opportunities for Near and DF

-0.6

Correlation Coefficient

Near  DF

Excellent diversification

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

Pair Corralation between Near and DF

Assuming the 90 days trading horizon Near is expected to under-perform the DF. But the crypto coin apears to be less risky and, when comparing its historical volatility, Near is 3.26 times less risky than DF. The crypto coin trades about -0.11 of its potential returns per unit of risk. The DF is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3.64  in DF on December 27, 2024 and sell it today you would lose (1.50) from holding DF or give up 41.21% of portfolio value over 90 days.

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

Near  vs.  DF

Near

Risk-Adjusted Performance

Very Weak

Over the last 90 days Near 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for Near shareholders.

DF

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DF are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, DF exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Near and DF

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

The idea behind Near and DF 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.