Correlation Between Endymed and Nextcom

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

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

Diversification Opportunities for Endymed and Nextcom

0.51

Correlation Coefficient

Endymed  Nextcom

Very weak diversification

The 3 months correlation between Endymed and Nextcom is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Endymed and Nextcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextcom and Endymed 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 Endymed are associated (or correlated) with Nextcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextcom has no effect on the direction of Endymed i.e., Endymed and Nextcom go up and down completely randomly.

Pair Corralation between Endymed and Nextcom

Assuming the 90 days trading horizon Endymed is expected to generate 2.7 times more return on investment than Nextcom. However, Endymed is 2.7 times more volatile than Nextcom. It trades about 0.06 of its potential returns per unit of risk. Nextcom is currently generating about 0.04 per unit of risk. If you would invest  26,700  in Endymed on September 4, 2024 and sell it today you would earn a total of  2,500  from holding Endymed or generate 9.36% return on investment over 90 days.

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

Endymed  vs.  Nextcom

Endymed

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Endymed are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Endymed sustained solid returns over the last few months and may actually be approaching a breakup point.

Nextcom

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Endymed and Nextcom

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

The idea behind Endymed and Nextcom 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.