Correlation Between Near and YAM

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

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

Diversification Opportunities for Near and YAM

-0.16

Correlation Coefficient

Near  YAM

Good diversification

The 3 months correlation between Near and YAM is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Near and YAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YAM 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 YAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YAM has no effect on the direction of Near i.e., Near and YAM go up and down completely randomly.

Pair Corralation between Near and YAM

Assuming the 90 days trading horizon Near is expected to generate 1.07 times more return on investment than YAM. However, Near is 1.07 times more volatile than YAM. It trades about 0.21 of its potential returns per unit of risk. YAM is currently generating about -0.02 per unit of risk. If you would invest  372.00  in Near on September 2, 2024 and sell it today you would earn a total of  329.00  from holding Near or generate 88.44% return on investment over 90 days.

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

Near  vs.  YAM

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.

YAM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days YAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, YAM is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Near and YAM

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

The idea behind Near and YAM 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.