Correlation Between NEM and Ardor

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Can any of the company-specific risk be diversified away by investing in both NEM and Ardor 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 NEM and Ardor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEM and Ardor, you can compare the effects of market volatilities on NEM and Ardor 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 NEM with a short position of Ardor. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEM and Ardor.

Diversification Opportunities for NEM and Ardor

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between NEM and Ardor is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding NEM and Ardor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardor and NEM 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 NEM are associated (or correlated) with Ardor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardor has no effect on the direction of NEM i.e., NEM and Ardor go up and down completely randomly.

Pair Corralation between NEM and Ardor

Assuming the 90 days trading horizon NEM is expected to under-perform the Ardor. In addition to that, NEM is 1.18 times more volatile than Ardor. It trades about -0.04 of its total potential returns per unit of risk. Ardor is currently generating about -0.04 per unit of volatility. If you would invest  32.00  in Ardor on May 17, 2022 and sell it today you would lose (20.00)  from holding Ardor or give up 62.5% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.6%
ValuesDaily Returns

NEM  vs.  Ardor

 Performance (%) 
       Timeline  
NEM 
NEM Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in NEM are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, NEM sustained solid returns over the last few months and may actually be approaching a breakup point.

NEM Price Channel

Ardor 
Ardor Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ardor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Ardor sustained solid returns over the last few months and may actually be approaching a breakup point.

Ardor Price Channel

NEM and Ardor Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NEM and Ardor

The main advantage of trading using opposite NEM and Ardor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEM position performs unexpectedly, Ardor 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 Ardor will offset losses from the drop in Ardor's long position.
The idea behind NEM and Ardor 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.
Check out your portfolio center. 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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