Correlation Between Millennium Food and Nextage Therapeutics

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

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

Diversification Opportunities for Millennium Food and Nextage Therapeutics

0.04

Correlation Coefficient

Millennium Food  Nextage Therapeutics

Significant diversification

The 3 months correlation between Millennium and Nextage is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Millennium Food Tech LP and Nextage Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextage Therapeutics and Millennium Food 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 Millennium Food Tech LP are associated (or correlated) with Nextage Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextage Therapeutics has no effect on the direction of Millennium Food i.e., Millennium Food and Nextage Therapeutics go up and down completely randomly.

Pair Corralation between Millennium Food and Nextage Therapeutics

Assuming the 90 days trading horizon Millennium Food Tech LP is expected to under-perform the Nextage Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Millennium Food Tech LP is 1.67 times less risky than Nextage Therapeutics. The stock trades about -0.03 of its potential returns per unit of risk. The Nextage Therapeutics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8,470  in Nextage Therapeutics on December 25, 2024 and sell it today you would earn a total of  1,640  from holding Nextage Therapeutics or generate 19.36% return on investment over 90 days.

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

Millennium Food Tech LP  vs.  Nextage Therapeutics

Millennium Food Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Millennium Food Tech LP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Millennium Food is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nextage Therapeutics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nextage Therapeutics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nextage Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Millennium Food and Nextage Therapeutics

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

The idea behind Millennium Food Tech LP and Nextage Therapeutics 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.