Correlation Between NEM and USD Coin
Can any of the company-specific risk be diversified away by investing in both NEM and USD Coin 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 USD Coin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEM and USD Coin, you can compare the effects of market volatilities on NEM and USD Coin 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 USD Coin. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEM and USD Coin.
Diversification Opportunities for NEM and USD Coin
Pay attention - limited upside
The 3 months correlation between NEM and USD is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NEM and USD Coin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USD Coin 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 USD Coin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USD Coin has no effect on the direction of NEM i.e., NEM and USD Coin go up and down completely randomly.
Pair Corralation between NEM and USD Coin
If you would invest 100.00 in USD Coin on January 26, 2024 and sell it today you would earn a total of 0.00 from holding USD Coin or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NEM vs. USD Coin
Performance |
| Timeline |
| NEM |
| USD Coin |
NEM and USD Coin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NEM and USD Coin
The main advantage of trading using opposite NEM and USD Coin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEM position performs unexpectedly, USD Coin 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 USD Coin will offset losses from the drop in USD Coin's long position.The idea behind NEM and USD Coin 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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