Correlation Between Next Generation and Cgrowth Capital

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

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

Diversification Opportunities for Next Generation and Cgrowth Capital

0.0

Correlation Coefficient

Next Generation  Cgrowth Capital

Pay attention - limited upside

The 3 months correlation between Next and Cgrowth is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Next Generation Management and Cgrowth Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cgrowth Capital and Next Generation 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 Generation Management are associated (or correlated) with Cgrowth Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cgrowth Capital has no effect on the direction of Next Generation i.e., Next Generation and Cgrowth Capital go up and down completely randomly.

Pair Corralation between Next Generation and Cgrowth Capital

Given the investment horizon of 90 days Next Generation Management is expected to generate 2.05 times more return on investment than Cgrowth Capital. However, Next Generation is 2.05 times more volatile than Cgrowth Capital. It trades about 0.13 of its potential returns per unit of risk. Cgrowth Capital is currently generating about 0.08 per unit of risk. If you would invest  0.03  in Next Generation Management on September 17, 2024 and sell it today you would earn a total of  0.12  from holding Next Generation Management or generate 400.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Next Generation Management  vs.  Cgrowth Capital

Next Generation Mana

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Next Generation Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Next Generation exhibited solid returns over the last few months and may actually be approaching a breakup point.

Cgrowth Capital

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Next Generation and Cgrowth Capital

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

The idea behind Next Generation Management and Cgrowth Capital 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.