Correlation Between Nextmart and Australis Capital

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

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

Diversification Opportunities for Nextmart and Australis Capital

-0.06

Correlation Coefficient

Nextmart  Australis Capital

Good diversification

The 3 months correlation between Nextmart and Australis is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Nextmart and Australis Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australis Capital and Nextmart 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 Nextmart are associated (or correlated) with Australis Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australis Capital has no effect on the direction of Nextmart i.e., Nextmart and Australis Capital go up and down completely randomly.

Pair Corralation between Nextmart and Australis Capital

If you would invest  0.04  in Nextmart on October 1, 2024 and sell it today you would earn a total of  0.02  from holding Nextmart or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Nextmart  vs.  Australis Capital

Nextmart

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nextmart are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Nextmart reported solid returns over the last few months and may actually be approaching a breakup point.

Australis Capital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Australis Capital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly sluggish basic indicators, Australis Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextmart and Australis Capital

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

The idea behind Nextmart and Australis 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.