Correlation Between NMC and BLZ

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

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

Diversification Opportunities for NMC and BLZ

0.29

Correlation Coefficient

NMC  BLZ

Modest diversification

The 3 months correlation between NMC and BLZ is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding NMC and BLZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLZ and NMC 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 NMC are associated (or correlated) with BLZ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BLZ has no effect on the direction of NMC i.e., NMC and BLZ go up and down completely randomly.

Pair Corralation between NMC and BLZ

Assuming the 90 days trading horizon NMC is expected to generate 0.35 times more return on investment than BLZ. However, NMC is 2.82 times less risky than BLZ. It trades about -0.39 of its potential returns per unit of risk. BLZ is currently generating about -0.42 per unit of risk. If you would invest  125.00  in NMC on October 12, 2024 and sell it today you would lose (34.00) from holding NMC or give up 27.2% of portfolio value over 90 days.

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

NMC  vs.  BLZ

NMC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NMC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, NMC exhibited solid returns over the last few months and may actually be approaching a breakup point.

BLZ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BLZ 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 basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for BLZ shareholders.

Pair Trading with NMC and BLZ

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

The idea behind NMC and BLZ 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.