Correlation Between Good Natured and NEXE Innovations

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

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

Diversification Opportunities for Good Natured and NEXE Innovations

-0.24

Correlation Coefficient

Good Natured  NEXE Innovations

Very good diversification

The 3 months correlation between Good and NEXE is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Good Natured Products and NEXE Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXE Innovations and Good Natured 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 Good Natured Products are associated (or correlated) with NEXE Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXE Innovations has no effect on the direction of Good Natured i.e., Good Natured and NEXE Innovations go up and down completely randomly.

Pair Corralation between Good Natured and NEXE Innovations

Assuming the 90 days horizon Good Natured Products is expected to generate 0.55 times more return on investment than NEXE Innovations. However, Good Natured Products is 1.83 times less risky than NEXE Innovations. It trades about 0.25 of its potential returns per unit of risk. NEXE Innovations is currently generating about -0.06 per unit of risk. If you would invest  0.50  in Good Natured Products on October 6, 2024 and sell it today you would earn a total of  0.04  from holding Good Natured Products or generate 8.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	39.02%
Values	Daily Returns

Good Natured Products  vs.  NEXE Innovations

Good Natured Products

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Good Natured Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Good Natured reported solid returns over the last few months and may actually be approaching a breakup point.

NEXE Innovations

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Good Natured and NEXE Innovations

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

The idea behind Good Natured Products and NEXE Innovations 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.