Correlation Between Nxu and COVANTA

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

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

Diversification Opportunities for Nxu and COVANTA

-0.76

Correlation Coefficient

Nxu  COVANTA

Pay attention - limited upside

The 3 months correlation between Nxu and COVANTA is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Nxu Inc and COVANTA HLDG P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COVANTA HLDG P and Nxu 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 Nxu Inc are associated (or correlated) with COVANTA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COVANTA HLDG P has no effect on the direction of Nxu i.e., Nxu and COVANTA go up and down completely randomly.

Pair Corralation between Nxu and COVANTA

Considering the 90-day investment horizon Nxu Inc is expected to generate 38.5 times more return on investment than COVANTA. However, Nxu is 38.5 times more volatile than COVANTA HLDG P. It trades about 0.12 of its potential returns per unit of risk. COVANTA HLDG P is currently generating about -0.13 per unit of risk. If you would invest  26.00  in Nxu Inc on October 6, 2024 and sell it today you would earn a total of  42.00  from holding Nxu Inc or generate 161.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.55%
Values	Daily Returns

Nxu Inc  vs.  COVANTA HLDG P

Nxu Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nxu Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Nxu unveiled solid returns over the last few months and may actually be approaching a breakup point.

COVANTA HLDG P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COVANTA HLDG P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for COVANTA HLDG P investors.

Pair Trading with Nxu and COVANTA

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

The idea behind Nxu Inc and COVANTA HLDG P 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.