Correlation Between Nano and BNT

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

By analyzing existing cross correlation between Nano and BNT, you can compare the effects of market volatilities on Nano and BNT 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 BNT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nano and BNT.

Diversification Opportunities for Nano and BNT

0.86

Correlation Coefficient

Nano  BNT

Very poor diversification

The 3 months correlation between Nano and BNT is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Nano and BNT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNT 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 BNT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNT has no effect on the direction of Nano i.e., Nano and BNT go up and down completely randomly.

Pair Corralation between Nano and BNT

Assuming the 90 days trading horizon Nano is expected to under-perform the BNT. In addition to that, Nano is 1.57 times more volatile than BNT. It trades about -0.2 of its total potential returns per unit of risk. BNT is currently generating about -0.2 per unit of volatility. If you would invest  89.00  in BNT on January 25, 2024 and sell it today you would lose (15.00) from holding BNT or give up 16.85% of portfolio value over 90 days.

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

Nano  vs.  BNT

Nano

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nano are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Nano exhibited solid returns over the last few months and may actually be approaching a breakup point.

BNT

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BNT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, BNT may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Nano and BNT

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

The idea behind Nano and BNT 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.