Correlation Between Next Entertainment and PI Advanced

Can any of the company-specific risk be diversified away by investing in both Next Entertainment and PI Advanced 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 PI Advanced 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 PI Advanced Materials, you can compare the effects of market volatilities on Next Entertainment and PI Advanced 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 PI Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Next Entertainment and PI Advanced.

Diversification Opportunities for Next Entertainment and PI Advanced

-0.21

Correlation Coefficient

Next Entertainment  PI Advanced

Very good diversification

The 3 months correlation between Next and 178920 is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Next Entertainment World and PI Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PI Advanced Materials 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 PI Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PI Advanced Materials has no effect on the direction of Next Entertainment i.e., Next Entertainment and PI Advanced go up and down completely randomly.

Pair Corralation between Next Entertainment and PI Advanced

Assuming the 90 days trading horizon Next Entertainment World is expected to under-perform the PI Advanced. But the stock apears to be less risky and, when comparing its historical volatility, Next Entertainment World is 1.06 times less risky than PI Advanced. The stock trades about -0.02 of its potential returns per unit of risk. The PI Advanced Materials is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,720,453  in PI Advanced Materials on December 24, 2024 and sell it today you would earn a total of  79,547  from holding PI Advanced Materials or generate 4.62% return on investment over 90 days.

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

Next Entertainment World  vs.  PI Advanced Materials

Next Entertainment World

Risk-Adjusted Performance

Very Weak

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

PI Advanced Materials

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Next Entertainment and PI Advanced

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

The idea behind Next Entertainment World and PI Advanced Materials 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.