Correlation Between Next Entertainment and Histeel

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

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

Diversification Opportunities for Next Entertainment and Histeel

0.75

Correlation Coefficient

Next Entertainment  Histeel

Poor diversification

The 3 months correlation between Next and Histeel is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Next Entertainment World and Histeel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Histeel and Next Entertainment 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 Entertainment World are associated (or correlated) with Histeel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Histeel has no effect on the direction of Next Entertainment i.e., Next Entertainment and Histeel go up and down completely randomly.

Pair Corralation between Next Entertainment and Histeel

Assuming the 90 days trading horizon Next Entertainment World is expected to generate 0.96 times more return on investment than Histeel. However, Next Entertainment World is 1.04 times less risky than Histeel. It trades about 0.05 of its potential returns per unit of risk. Histeel is currently generating about -0.01 per unit of risk. If you would invest  223,500  in Next Entertainment World on September 4, 2024 and sell it today you would earn a total of  12,500  from holding Next Entertainment World or generate 5.59% return on investment over 90 days.

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

Next Entertainment World  vs.  Histeel

Next Entertainment World

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Next Entertainment World are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Next Entertainment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Histeel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Histeel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Histeel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Next Entertainment and Histeel

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

The idea behind Next Entertainment World and Histeel 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 the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.