Correlation Between Next Entertainment and Carriesoft

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

Diversification Opportunities for Next Entertainment and Carriesoft

0.13

Correlation Coefficient

Next Entertainment  Carriesoft

Average diversification

The 3 months correlation between Next and Carriesoft is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Next Entertainment World and Carriesoft Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carriesoft 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 Carriesoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carriesoft has no effect on the direction of Next Entertainment i.e., Next Entertainment and Carriesoft go up and down completely randomly.

Pair Corralation between Next Entertainment and Carriesoft

Assuming the 90 days trading horizon Next Entertainment is expected to generate 3.05 times less return on investment than Carriesoft. But when comparing it to its historical volatility, Next Entertainment World is 1.19 times less risky than Carriesoft. It trades about 0.04 of its potential returns per unit of risk. Carriesoft Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  324,000  in Carriesoft Co on September 4, 2024 and sell it today you would earn a total of  56,500  from holding Carriesoft Co or generate 17.44% return on investment over 90 days.

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

Next Entertainment World  vs.  Carriesoft Co

Next Entertainment World

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Next Entertainment World are ranked lower than 2 (%) 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.

Carriesoft

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carriesoft Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Carriesoft sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Next Entertainment and Carriesoft

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

The idea behind Next Entertainment World and Carriesoft Co 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.