Correlation Between Nano and BRC
Can any of the company-specific risk be diversified away by investing in both Nano and BRC 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 Nano and BRC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nano and BRC, you can compare the effects of market volatilities on Nano and BRC 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 Nano with a short position of BRC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nano and BRC.
Diversification Opportunities for Nano and BRC
Good diversification
The 3 months correlation between Nano and BRC is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Nano and BRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRC and Nano 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 Nano are associated (or correlated) with BRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRC has no effect on the direction of Nano i.e., Nano and BRC go up and down completely randomly.
Pair Corralation between Nano and BRC
Assuming the 90 days trading horizon Nano is expected to generate 1.38 times more return on investment than BRC. However, Nano is 1.38 times more volatile than BRC. It trades about 0.01 of its potential returns per unit of risk. BRC is currently generating about -0.01 per unit of risk. If you would invest 173.00 in Nano on January 26, 2024 and sell it today you would lose (54.00) from holding Nano or give up 31.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 70.76% |
| Values | Daily Returns |
Nano vs. BRC
Performance |
| Timeline |
| Nano |
| BRC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Nano and BRC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nano and BRC
The main advantage of trading using opposite Nano and BRC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nano position performs unexpectedly, BRC 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 BRC will offset losses from the drop in BRC's long position.The idea behind Nano and BRC 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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