Correlation Between Jiayin and Nextmart

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

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

Diversification Opportunities for Jiayin and Nextmart

0.67

Correlation Coefficient

Jiayin  Nextmart

Poor diversification

The 3 months correlation between Jiayin and Nextmart is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Jiayin Group and Nextmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextmart and Jiayin 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 Jiayin Group 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 Jiayin i.e., Jiayin and Nextmart go up and down completely randomly.

Pair Corralation between Jiayin and Nextmart

Given the investment horizon of 90 days Jiayin is expected to generate 77.15 times less return on investment than Nextmart. But when comparing it to its historical volatility, Jiayin Group is 19.0 times less risky than Nextmart. It trades about 0.04 of its potential returns per unit of risk. Nextmart is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Nextmart on October 4, 2024 and sell it today you would earn a total of  0.05  from holding Nextmart or generate 500.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.21%
Values	Daily Returns

Jiayin Group  vs.  Nextmart

Jiayin Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiayin Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Nextmart

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nextmart are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, Nextmart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiayin and Nextmart

The main advantage of trading using opposite Jiayin and Nextmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jiayin 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 Jiayin Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.