Correlation Between Nextmart and Genomma Lab

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

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

Diversification Opportunities for Nextmart and Genomma Lab

0.01

Correlation Coefficient

Nextmart  Genomma Lab

Significant diversification

The 3 months correlation between Nextmart and Genomma is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Nextmart and Genomma Lab Internacional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genomma Lab Internacional 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 Genomma Lab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genomma Lab Internacional has no effect on the direction of Nextmart i.e., Nextmart and Genomma Lab go up and down completely randomly.

Pair Corralation between Nextmart and Genomma Lab

Given the investment horizon of 90 days Nextmart is expected to generate 47.77 times more return on investment than Genomma Lab. However, Nextmart is 47.77 times more volatile than Genomma Lab Internacional. It trades about 0.16 of its potential returns per unit of risk. Genomma Lab Internacional is currently generating about 0.13 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	Moves Together
Strength	Insignificant
Accuracy	84.62%
Values	Daily Returns

Nextmart  vs.  Genomma Lab Internacional

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 inconsistent primary indicators, Nextmart reported solid returns over the last few months and may actually be approaching a breakup point.

Genomma Lab Internacional

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Genomma Lab Internacional has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak essential indicators, Genomma Lab reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextmart and Genomma Lab

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

The idea behind Nextmart and Genomma Lab Internacional 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.