Correlation Between Next Hydrogen and Quality Industrial

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

By analyzing existing cross correlation between Next Hydrogen Solutions and Quality Industrial Corp, you can compare the effects of market volatilities on Next Hydrogen and Quality Industrial 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 Hydrogen with a short position of Quality Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Next Hydrogen and Quality Industrial.

Diversification Opportunities for Next Hydrogen and Quality Industrial

-0.58

Correlation Coefficient

Next Hydrogen  Quality Industrial

Excellent diversification

The 3 months correlation between Next and Quality is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Next Hydrogen Solutions and Quality Industrial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quality Industrial Corp and Next Hydrogen 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 Hydrogen Solutions are associated (or correlated) with Quality Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quality Industrial Corp has no effect on the direction of Next Hydrogen i.e., Next Hydrogen and Quality Industrial go up and down completely randomly.

Pair Corralation between Next Hydrogen and Quality Industrial

Assuming the 90 days horizon Next Hydrogen Solutions is expected to generate 1.27 times more return on investment than Quality Industrial. However, Next Hydrogen is 1.27 times more volatile than Quality Industrial Corp. It trades about 0.09 of its potential returns per unit of risk. Quality Industrial Corp is currently generating about 0.05 per unit of risk. If you would invest  29.00  in Next Hydrogen Solutions on September 13, 2024 and sell it today you would earn a total of  1.00  from holding Next Hydrogen Solutions or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Next Hydrogen Solutions  vs.  Quality Industrial Corp

Next Hydrogen Solutions

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Next Hydrogen Solutions are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Next Hydrogen reported solid returns over the last few months and may actually be approaching a breakup point.

Quality Industrial Corp

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Quality Industrial Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Quality Industrial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Next Hydrogen and Quality Industrial

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

The idea behind Next Hydrogen Solutions and Quality Industrial Corp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.