Correlation Between Next Bt and Homecast CoLtd
Can any of the company-specific risk be diversified away by investing in both Next Bt and Homecast CoLtd 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 Next Bt and Homecast CoLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Next Bt Co and Homecast CoLtd, you can compare the effects of market volatilities on Next Bt and Homecast CoLtd 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 Next Bt with a short position of Homecast CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Next Bt and Homecast CoLtd.
Diversification Opportunities for Next Bt and Homecast CoLtd
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Next and Homecast is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Next Bt Co and Homecast CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homecast CoLtd and Next Bt 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 Next Bt Co are associated (or correlated) with Homecast CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homecast CoLtd has no effect on the direction of Next Bt i.e., Next Bt and Homecast CoLtd go up and down completely randomly.
Pair Corralation between Next Bt and Homecast CoLtd
Assuming the 90 days trading horizon Next Bt Co is expected to generate 1.79 times more return on investment than Homecast CoLtd. However, Next Bt is 1.79 times more volatile than Homecast CoLtd. It trades about -0.06 of its potential returns per unit of risk. Homecast CoLtd is currently generating about -0.1 per unit of risk. If you would invest 238,000 in Next Bt Co on October 22, 2024 and sell it today you would lose (42,000) from holding Next Bt Co or give up 17.65% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 75.81% |
Values | Daily Returns |
Next Bt Co vs. Homecast CoLtd
Performance |
Timeline |
Next Bt |
Homecast CoLtd |
Next Bt and Homecast CoLtd Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Next Bt and Homecast CoLtd
The main advantage of trading using opposite Next Bt and Homecast CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Next Bt position performs unexpectedly, Homecast CoLtd 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 Homecast CoLtd will offset losses from the drop in Homecast CoLtd's long position.Next Bt vs. Coloray International Investment | Next Bt vs. LB Investment | Next Bt vs. Dongil Metal Co | Next Bt vs. Atinum Investment Co |
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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 the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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