Correlation Between Nsx and Microequities Asset

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

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

Diversification Opportunities for Nsx and Microequities Asset

-0.1

Correlation Coefficient

Nsx  Microequities Asset

Good diversification

The 3 months correlation between Nsx and Microequities is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Nsx and Microequities Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microequities Asset and Nsx 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 Nsx are associated (or correlated) with Microequities Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microequities Asset has no effect on the direction of Nsx i.e., Nsx and Microequities Asset go up and down completely randomly.

Pair Corralation between Nsx and Microequities Asset

Assuming the 90 days trading horizon Nsx is expected to generate 3.54 times more return on investment than Microequities Asset. However, Nsx is 3.54 times more volatile than Microequities Asset Management. It trades about 0.1 of its potential returns per unit of risk. Microequities Asset Management is currently generating about 0.05 per unit of risk. If you would invest  1.80  in Nsx on September 15, 2024 and sell it today you would earn a total of  0.70  from holding Nsx or generate 38.89% return on investment over 90 days.

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

Nsx  vs.  Microequities Asset Management

Nsx

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nsx are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nsx unveiled solid returns over the last few months and may actually be approaching a breakup point.

Microequities Asset

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Nsx and Microequities Asset

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

The idea behind Nsx and Microequities Asset Management 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.