Correlation Between NEXCOM International and Gigastorage Corp

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

By analyzing existing cross correlation between NEXCOM International Co and Gigastorage Corp, you can compare the effects of market volatilities on NEXCOM International and Gigastorage Corp 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 NEXCOM International with a short position of Gigastorage Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEXCOM International and Gigastorage Corp.

Diversification Opportunities for NEXCOM International and Gigastorage Corp

0.07

Correlation Coefficient

NEXCOM International  Gigastorage Corp

Significant diversification

The 3 months correlation between NEXCOM and Gigastorage is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NEXCOM International Co and Gigastorage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gigastorage Corp and NEXCOM International 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 NEXCOM International Co are associated (or correlated) with Gigastorage Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gigastorage Corp has no effect on the direction of NEXCOM International i.e., NEXCOM International and Gigastorage Corp go up and down completely randomly.

Pair Corralation between NEXCOM International and Gigastorage Corp

Assuming the 90 days trading horizon NEXCOM International Co is expected to generate 2.27 times more return on investment than Gigastorage Corp. However, NEXCOM International is 2.27 times more volatile than Gigastorage Corp. It trades about 0.16 of its potential returns per unit of risk. Gigastorage Corp is currently generating about -0.02 per unit of risk. If you would invest  6,000  in NEXCOM International Co on December 25, 2024 and sell it today you would earn a total of  2,650  from holding NEXCOM International Co or generate 44.17% return on investment over 90 days.

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

NEXCOM International Co  vs.  Gigastorage Corp

NEXCOM International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NEXCOM International Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, NEXCOM International showed solid returns over the last few months and may actually be approaching a breakup point.

Gigastorage Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gigastorage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Gigastorage Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with NEXCOM International and Gigastorage Corp

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

The idea behind NEXCOM International Co and Gigastorage Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.