Correlation Between Dupont De and NXS

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

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

Diversification Opportunities for Dupont De and NXS

0.9

Correlation Coefficient

Dupont De  NXS

Almost no diversification

The 3 months correlation between Dupont and NXS is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and NXS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXS and Dupont De 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 Dupont De Nemours are associated (or correlated) with NXS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXS has no effect on the direction of Dupont De i.e., Dupont De and NXS go up and down completely randomly.

Pair Corralation between Dupont De and NXS

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the NXS. But the stock apears to be less risky and, when comparing its historical volatility, Dupont De Nemours is 3.36 times less risky than NXS. The stock trades about -0.26 of its potential returns per unit of risk. The NXS is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  16.00  in NXS on February 1, 2024 and sell it today you would lose (1.00) from holding NXS or give up 6.25% of portfolio value over 90 days.

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

Dupont De Nemours  vs.  NXS

Dupont De Nemours

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Dupont De exhibited solid returns over the last few months and may actually be approaching a breakup point.

NXS

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NXS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, NXS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and NXS

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

The idea behind Dupont De Nemours and NXS 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.