Correlation Between NXT Energy and ADVA Optical

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

By analyzing existing cross correlation between NXT Energy Solutions and ADVA Optical Networking, you can compare the effects of market volatilities on NXT Energy and ADVA Optical 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 NXT Energy with a short position of ADVA Optical. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXT Energy and ADVA Optical.

Diversification Opportunities for NXT Energy and ADVA Optical

0.0

Correlation Coefficient

NXT Energy  ADVA Optical

Pay attention - limited upside

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

Pair Corralation between NXT Energy and ADVA Optical

If you would invest  12.00  in NXT Energy Solutions on December 28, 2024 and sell it today you would earn a total of  7.00  from holding NXT Energy Solutions or generate 58.33% return on investment over 90 days.

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

NXT Energy Solutions  vs.  ADVA Optical Networking

NXT Energy Solutions

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NXT Energy Solutions are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, NXT Energy reported solid returns over the last few months and may actually be approaching a breakup point.

ADVA Optical Networking

Risk-Adjusted Performance

Very Weak

Over the last 90 days ADVA Optical Networking has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ADVA Optical is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NXT Energy and ADVA Optical

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

The idea behind NXT Energy Solutions and ADVA Optical Networking 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .