Correlation Between Nexoptic Technology and Liberty Defense

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

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

Diversification Opportunities for Nexoptic Technology and Liberty Defense

-0.66

Correlation Coefficient

Nexoptic Technology  Liberty Defense

Excellent diversification

The 3 months correlation between Nexoptic and Liberty is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Nexoptic Technology Corp and Liberty Defense Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Defense Holdings and Nexoptic Technology 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 Nexoptic Technology Corp are associated (or correlated) with Liberty Defense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Defense Holdings has no effect on the direction of Nexoptic Technology i.e., Nexoptic Technology and Liberty Defense go up and down completely randomly.

Pair Corralation between Nexoptic Technology and Liberty Defense

Assuming the 90 days horizon Nexoptic Technology Corp is expected to generate 1.5 times more return on investment than Liberty Defense. However, Nexoptic Technology is 1.5 times more volatile than Liberty Defense Holdings. It trades about 0.08 of its potential returns per unit of risk. Liberty Defense Holdings is currently generating about 0.03 per unit of risk. If you would invest  2.00  in Nexoptic Technology Corp on September 25, 2024 and sell it today you would earn a total of  0.50  from holding Nexoptic Technology Corp or generate 25.0% return on investment over 90 days.

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

Nexoptic Technology Corp  vs.  Liberty Defense Holdings

Nexoptic Technology Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nexoptic Technology Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Nexoptic Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Liberty Defense Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Defense Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Liberty Defense reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nexoptic Technology and Liberty Defense

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

The idea behind Nexoptic Technology Corp and Liberty Defense Holdings 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.