Correlation Between NEM and OKB
Can any of the company-specific risk be diversified away by investing in both NEM and OKB 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 NEM and OKB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEM and OKB, you can compare the effects of market volatilities on NEM and OKB 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 NEM with a short position of OKB. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEM and OKB.
Diversification Opportunities for NEM and OKB
Very poor diversification
The 3 months correlation between NEM and OKB is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding NEM and OKB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OKB and NEM 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 NEM are associated (or correlated) with OKB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OKB has no effect on the direction of NEM i.e., NEM and OKB go up and down completely randomly.
Pair Corralation between NEM and OKB
Assuming the 90 days trading horizon NEM is expected to under-perform the OKB. In addition to that, NEM is 1.6 times more volatile than OKB. It trades about -0.01 of its total potential returns per unit of risk. OKB is currently generating about 0.08 per unit of volatility. If you would invest 4,713 in OKB on January 20, 2024 and sell it today you would earn a total of 817.00 from holding OKB or generate 17.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NEM vs. OKB
Performance |
| Timeline |
| NEM |
| OKB |
NEM and OKB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NEM and OKB
The main advantage of trading using opposite NEM and OKB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEM position performs unexpectedly, OKB 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 OKB will offset losses from the drop in OKB's long position.The idea behind NEM and OKB 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 CEOs Directory module to screen CEOs from public companies around the world.
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