Correlation Between Financial and Neptune Digital

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

By analyzing existing cross correlation between Financial 15 Split and Neptune Digital Assets, you can compare the effects of market volatilities on Financial and Neptune Digital 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 Financial with a short position of Neptune Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Neptune Digital.

Diversification Opportunities for Financial and Neptune Digital

0.76

Correlation Coefficient

Financial  Neptune Digital

Poor diversification

The 3 months correlation between Financial and Neptune is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Neptune Digital Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neptune Digital Assets and Financial 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 Financial 15 Split are associated (or correlated) with Neptune Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neptune Digital Assets has no effect on the direction of Financial i.e., Financial and Neptune Digital go up and down completely randomly.

Pair Corralation between Financial and Neptune Digital

Assuming the 90 days trading horizon Financial is expected to generate 4.13 times less return on investment than Neptune Digital. But when comparing it to its historical volatility, Financial 15 Split is 9.49 times less risky than Neptune Digital. It trades about 0.19 of its potential returns per unit of risk. Neptune Digital Assets is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  37.00  in Neptune Digital Assets on September 12, 2024 and sell it today you would earn a total of  73.00  from holding Neptune Digital Assets or generate 197.3% return on investment over 90 days.

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

Financial 15 Split  vs.  Neptune Digital Assets

Financial 15 Split

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Neptune Digital Assets

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Neptune Digital Assets are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Neptune Digital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Financial and Neptune Digital

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

The idea behind Financial 15 Split and Neptune Digital Assets 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.