Correlation Between Nextmart and Industrial Nanotech

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

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

Diversification Opportunities for Nextmart and Industrial Nanotech

0.16

Correlation Coefficient

Nextmart  Industrial Nanotech

Average diversification

The 3 months correlation between Nextmart and Industrial is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Nextmart and Industrial Nanotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Nanotech 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 Industrial Nanotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Nanotech has no effect on the direction of Nextmart i.e., Nextmart and Industrial Nanotech go up and down completely randomly.

Pair Corralation between Nextmart and Industrial Nanotech

Given the investment horizon of 90 days Nextmart is expected to generate 13.98 times less return on investment than Industrial Nanotech. But when comparing it to its historical volatility, Nextmart is 5.16 times less risky than Industrial Nanotech. It trades about 0.12 of its potential returns per unit of risk. Industrial Nanotech is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Industrial Nanotech on October 22, 2024 and sell it today you would earn a total of  0.00  from holding Industrial Nanotech or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Nextmart  vs.  Industrial Nanotech

Nextmart

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nextmart are ranked lower than 9 (%) 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.

Industrial Nanotech

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Nanotech are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Industrial Nanotech disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextmart and Industrial Nanotech

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

The idea behind Nextmart and Industrial Nanotech 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.