Correlation Between Nano and DRGN

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

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

Diversification Opportunities for Nano and DRGN

0.3

Correlation Coefficient

Nano  DRGN

Weak diversification

The 3 months correlation between Nano and DRGN is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Nano and DRGN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRGN 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 DRGN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DRGN has no effect on the direction of Nano i.e., Nano and DRGN go up and down completely randomly.

Pair Corralation between Nano and DRGN

Assuming the 90 days trading horizon Nano is expected to generate 14.61 times less return on investment than DRGN. But when comparing it to its historical volatility, Nano is 14.31 times less risky than DRGN. It trades about 0.08 of its potential returns per unit of risk. DRGN is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.59  in DRGN on January 24, 2024 and sell it today you would earn a total of  4.22  from holding DRGN or generate 714.15% return on investment over 90 days.

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

Nano  vs.  DRGN

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.

DRGN

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DRGN are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, DRGN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nano and DRGN

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

The idea behind Nano and DRGN 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.