Correlation Between Next Generation and Sack Lunch

Can any of the company-specific risk be diversified away by investing in both Next Generation and Sack Lunch 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 Sack Lunch 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 Sack Lunch Productions, you can compare the effects of market volatilities on Next Generation and Sack Lunch 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 Sack Lunch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Next Generation and Sack Lunch.

Diversification Opportunities for Next Generation and Sack Lunch

0.26

Correlation Coefficient

Next Generation  Sack Lunch

Modest diversification

The 3 months correlation between Next and Sack is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Next Generation Management and Sack Lunch Productions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sack Lunch Productions 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 Sack Lunch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sack Lunch Productions has no effect on the direction of Next Generation i.e., Next Generation and Sack Lunch go up and down completely randomly.

Pair Corralation between Next Generation and Sack Lunch

Given the investment horizon of 90 days Next Generation Management is expected to generate 1.63 times more return on investment than Sack Lunch. However, Next Generation is 1.63 times more volatile than Sack Lunch Productions. It trades about 0.1 of its potential returns per unit of risk. Sack Lunch Productions is currently generating about 0.07 per unit of risk. If you would invest  0.12  in Next Generation Management on September 13, 2024 and sell it today you would earn a total of  0.03  from holding Next Generation Management or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Next Generation Management  vs.  Sack Lunch Productions

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.

Sack Lunch Productions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sack Lunch Productions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Sack Lunch is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Next Generation and Sack Lunch

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

The idea behind Next Generation Management and Sack Lunch Productions 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.