Correlation Between Next Biometrics and Goodtech

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

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

Diversification Opportunities for Next Biometrics and Goodtech

0.84

Correlation Coefficient

Next Biometrics  Goodtech

Very poor diversification

The 3 months correlation between Next and Goodtech is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Next Biometrics Group and Goodtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodtech and Next Biometrics 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 Next Biometrics Group are associated (or correlated) with Goodtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodtech has no effect on the direction of Next Biometrics i.e., Next Biometrics and Goodtech go up and down completely randomly.

Pair Corralation between Next Biometrics and Goodtech

Assuming the 90 days trading horizon Next Biometrics Group is expected to under-perform the Goodtech. But the stock apears to be less risky and, when comparing its historical volatility, Next Biometrics Group is 1.11 times less risky than Goodtech. The stock trades about -0.16 of its potential returns per unit of risk. The Goodtech is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  1,140  in Goodtech on September 5, 2024 and sell it today you would lose (206.00) from holding Goodtech or give up 18.07% of portfolio value over 90 days.

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

Next Biometrics Group  vs.  Goodtech

Next Biometrics Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Next Biometrics Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Goodtech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goodtech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Next Biometrics and Goodtech

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

The idea behind Next Biometrics Group and Goodtech 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.