Correlation Between Near and CEL

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

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

Diversification Opportunities for Near and CEL

0.48

Correlation Coefficient

Near  CEL

Very weak diversification

The 3 months correlation between Near and CEL is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Near and CEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEL and Near 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 Near are associated (or correlated) with CEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEL has no effect on the direction of Near i.e., Near and CEL go up and down completely randomly.

Pair Corralation between Near and CEL

Assuming the 90 days trading horizon Near is expected to generate 2.75 times less return on investment than CEL. But when comparing it to its historical volatility, Near is 3.89 times less risky than CEL. It trades about 0.21 of its potential returns per unit of risk. CEL is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  14.00  in CEL on September 1, 2024 and sell it today you would earn a total of  15.00  from holding CEL or generate 107.14% return on investment over 90 days.

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

Near  vs.  CEL

Near

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Near are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Near exhibited solid returns over the last few months and may actually be approaching a breakup point.

CEL

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CEL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, CEL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Near and CEL

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

The idea behind Near and CEL 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.