Correlation Between NXG NextGen and New Germany

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

By analyzing existing cross correlation between NXG NextGen Infrastructure and New Germany Closed, you can compare the effects of market volatilities on NXG NextGen and New Germany 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 NXG NextGen with a short position of New Germany. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXG NextGen and New Germany.

Diversification Opportunities for NXG NextGen and New Germany

0.28

Correlation Coefficient

NXG NextGen  New Germany

Modest diversification

The 3 months correlation between NXG and New is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding NXG NextGen Infrastructure and New Germany Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Germany Closed and NXG NextGen 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 NXG NextGen Infrastructure are associated (or correlated) with New Germany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Germany Closed has no effect on the direction of NXG NextGen i.e., NXG NextGen and New Germany go up and down completely randomly.

Pair Corralation between NXG NextGen and New Germany

Considering the 90-day investment horizon NXG NextGen is expected to generate 1.98 times less return on investment than New Germany. In addition to that, NXG NextGen is 1.54 times more volatile than New Germany Closed. It trades about 0.11 of its total potential returns per unit of risk. New Germany Closed is currently generating about 0.32 per unit of volatility. If you would invest  795.00  in New Germany Closed on December 25, 2024 and sell it today you would earn a total of  234.00  from holding New Germany Closed or generate 29.43% return on investment over 90 days.

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

NXG NextGen Infrastructure  vs.  New Germany Closed

NXG NextGen Infrastr

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NXG NextGen Infrastructure are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, NXG NextGen reported solid returns over the last few months and may actually be approaching a breakup point.

New Germany Closed

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in New Germany Closed are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly uncertain technical and fundamental indicators, New Germany reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NXG NextGen and New Germany

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

The idea behind NXG NextGen Infrastructure and New Germany Closed 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.