Correlation Between NEM INSURANCE and NIGERIAN EXCHANGE

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

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

Diversification Opportunities for NEM INSURANCE and NIGERIAN EXCHANGE

0.34

Correlation Coefficient

NEM INSURANCE  NIGERIAN EXCHANGE

Weak diversification

The 3 months correlation between NEM and NIGERIAN is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding NEM INSURANCE PLC and NIGERIAN EXCHANGE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIGERIAN EXCHANGE and NEM INSURANCE 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 NEM INSURANCE PLC are associated (or correlated) with NIGERIAN EXCHANGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIGERIAN EXCHANGE has no effect on the direction of NEM INSURANCE i.e., NEM INSURANCE and NIGERIAN EXCHANGE go up and down completely randomly.

Pair Corralation between NEM INSURANCE and NIGERIAN EXCHANGE

Assuming the 90 days trading horizon NEM INSURANCE PLC is expected to generate 0.8 times more return on investment than NIGERIAN EXCHANGE. However, NEM INSURANCE PLC is 1.26 times less risky than NIGERIAN EXCHANGE. It trades about 0.09 of its potential returns per unit of risk. NIGERIAN EXCHANGE GROUP is currently generating about 0.06 per unit of risk. If you would invest  750.00  in NEM INSURANCE PLC on September 2, 2024 and sell it today you would earn a total of  100.00  from holding NEM INSURANCE PLC or generate 13.33% return on investment over 90 days.

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

NEM INSURANCE PLC  vs.  NIGERIAN EXCHANGE GROUP

NEM INSURANCE PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NEM INSURANCE PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NEM INSURANCE unveiled solid returns over the last few months and may actually be approaching a breakup point.

NIGERIAN EXCHANGE

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NIGERIAN EXCHANGE GROUP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NIGERIAN EXCHANGE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEM INSURANCE and NIGERIAN EXCHANGE

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

The idea behind NEM INSURANCE PLC and NIGERIAN EXCHANGE GROUP 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.