Correlation Between Industrial Nanotech and Nextmart

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

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

Diversification Opportunities for Industrial Nanotech and Nextmart

0.08

Correlation Coefficient

Industrial Nanotech  Nextmart

Significant diversification

The 3 months correlation between Industrial and Nextmart is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Nanotech and Nextmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextmart and Industrial Nanotech 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 Industrial Nanotech are associated (or correlated) with Nextmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextmart has no effect on the direction of Industrial Nanotech i.e., Industrial Nanotech and Nextmart go up and down completely randomly.

Pair Corralation between Industrial Nanotech and Nextmart

Given the investment horizon of 90 days Industrial Nanotech is expected to generate 17.61 times more return on investment than Nextmart. However, Industrial Nanotech is 17.61 times more volatile than Nextmart. It trades about 0.35 of its potential returns per unit of risk. Nextmart is currently generating about -0.13 per unit of risk. If you would invest  0.01  in Industrial Nanotech on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Industrial Nanotech or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Industrial Nanotech  vs.  Nextmart

Industrial Nanotech

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Nanotech are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Industrial Nanotech disclosed solid returns over the last few months and may actually be approaching a breakup point.

Nextmart

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nextmart are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent primary indicators, Nextmart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial Nanotech and Nextmart

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

The idea behind Industrial Nanotech and Nextmart 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.