Correlation Between NMC and Litecoin

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

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

Diversification Opportunities for NMC and Litecoin

0.37

Correlation Coefficient

NMC  Litecoin

Weak diversification

The 3 months correlation between NMC and Litecoin is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding NMC and Litecoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litecoin 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 Litecoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litecoin has no effect on the direction of NMC i.e., NMC and Litecoin go up and down completely randomly.

Pair Corralation between NMC and Litecoin

Assuming the 90 days trading horizon NMC is expected to generate 0.39 times more return on investment than Litecoin. However, NMC is 2.58 times less risky than Litecoin. It trades about 0.06 of its potential returns per unit of risk. Litecoin is currently generating about -0.01 per unit of risk. If you would invest  91.00  in NMC on December 29, 2024 and sell it today you would earn a total of  6.00  from holding NMC or generate 6.59% return on investment over 90 days.

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

NMC  vs.  Litecoin

NMC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NMC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, NMC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Litecoin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Litecoin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Litecoin is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NMC and Litecoin

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

The idea behind NMC and Litecoin 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .