Correlation Between Nextmart and Greater Cannabis

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

By analyzing existing cross correlation between Nextmart and Greater Cannabis, you can compare the effects of market volatilities on Nextmart and Greater Cannabis 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 Greater Cannabis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextmart and Greater Cannabis.

Diversification Opportunities for Nextmart and Greater Cannabis

0.0

Correlation Coefficient

Nextmart  Greater Cannabis

Pay attention - limited upside

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

Pair Corralation between Nextmart and Greater Cannabis

Given the investment horizon of 90 days Nextmart is expected to generate 6.3 times more return on investment than Greater Cannabis. However, Nextmart is 6.3 times more volatile than Greater Cannabis. It trades about 0.16 of its potential returns per unit of risk. Greater Cannabis is currently generating about 0.03 per unit of risk. 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	Flat
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Nextmart  vs.  Greater Cannabis

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.

Greater Cannabis

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Greater Cannabis are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Greater Cannabis displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextmart and Greater Cannabis

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

The idea behind Nextmart and Greater Cannabis 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.