Correlation Between NanoTech Gaming and Space Communication

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

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

Diversification Opportunities for NanoTech Gaming and Space Communication

-1.0

Correlation Coefficient

NanoTech Gaming  Space Communication

Pay attention - limited upside

The 3 months correlation between NanoTech and Space is -1.0. Overlapping area represents the amount of risk that can be diversified away by holding NanoTech Gaming and Space Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Space Communication and NanoTech Gaming 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 NanoTech Gaming are associated (or correlated) with Space Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Space Communication has no effect on the direction of NanoTech Gaming i.e., NanoTech Gaming and Space Communication go up and down completely randomly.

Pair Corralation between NanoTech Gaming and Space Communication

Given the investment horizon of 90 days NanoTech Gaming is expected to generate 11.63 times more return on investment than Space Communication. However, NanoTech Gaming is 11.63 times more volatile than Space Communication. It trades about 0.04 of its potential returns per unit of risk. Space Communication is currently generating about -0.04 per unit of risk. If you would invest  0.03  in NanoTech Gaming on September 26, 2024 and sell it today you would lose (0.02) from holding NanoTech Gaming or give up 66.67% of portfolio value over 90 days.

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

NanoTech Gaming  vs.  Space Communication

NanoTech Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NanoTech Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, NanoTech Gaming is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Space Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Space Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Space Communication is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NanoTech Gaming and Space Communication

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

The idea behind NanoTech Gaming and Space Communication 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.