Correlation Between Next Mediaworks and AAA Technologies

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

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

Diversification Opportunities for Next Mediaworks and AAA Technologies

-0.21

Correlation Coefficient

Next Mediaworks  AAA Technologies

Very good diversification

The 3 months correlation between Next and AAA is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Next Mediaworks Limited and AAA Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAA Technologies and Next Mediaworks 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 Mediaworks Limited are associated (or correlated) with AAA Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAA Technologies has no effect on the direction of Next Mediaworks i.e., Next Mediaworks and AAA Technologies go up and down completely randomly.

Pair Corralation between Next Mediaworks and AAA Technologies

Assuming the 90 days trading horizon Next Mediaworks Limited is expected to generate 1.39 times more return on investment than AAA Technologies. However, Next Mediaworks is 1.39 times more volatile than AAA Technologies Limited. It trades about 0.1 of its potential returns per unit of risk. AAA Technologies Limited is currently generating about -0.01 per unit of risk. If you would invest  744.00  in Next Mediaworks Limited on August 31, 2024 and sell it today you would earn a total of  190.00  from holding Next Mediaworks Limited or generate 25.54% return on investment over 90 days.

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

Next Mediaworks Limited  vs.  AAA Technologies Limited

Next Mediaworks

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Next Mediaworks Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Next Mediaworks exhibited solid returns over the last few months and may actually be approaching a breakup point.

AAA Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AAA Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, AAA Technologies is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Next Mediaworks and AAA Technologies

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

The idea behind Next Mediaworks Limited and AAA Technologies Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.