Correlation Between Near and TRUE

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

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

Diversification Opportunities for Near and TRUE

0.76

Correlation Coefficient

Near  TRUE

Poor diversification

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

Pair Corralation between Near and TRUE

Assuming the 90 days trading horizon Near is expected to under-perform the TRUE. In addition to that, Near is 2.59 times more volatile than TRUE. It trades about -0.13 of its total potential returns per unit of risk. TRUE is currently generating about -0.07 per unit of volatility. If you would invest  5.88  in TRUE on December 29, 2024 and sell it today you would lose (0.68) from holding TRUE or give up 11.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Near  vs.  TRUE

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.

TRUE

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRUE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for TRUE shareholders.

Pair Trading with Near and TRUE

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

The idea behind Near and TRUE 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.