Correlation Between Nextmart and Pharmagreen Biotech

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

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

Diversification Opportunities for Nextmart and Pharmagreen Biotech

0.51

Correlation Coefficient

Nextmart  Pharmagreen Biotech

Very weak diversification

The 3 months correlation between Nextmart and Pharmagreen is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Nextmart and Pharmagreen Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharmagreen Biotech 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 Pharmagreen Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharmagreen Biotech has no effect on the direction of Nextmart i.e., Nextmart and Pharmagreen Biotech go up and down completely randomly.

Pair Corralation between Nextmart and Pharmagreen Biotech

Given the investment horizon of 90 days Nextmart is expected to generate 17.29 times more return on investment than Pharmagreen Biotech. However, Nextmart is 17.29 times more volatile than Pharmagreen Biotech. It trades about 0.16 of its potential returns per unit of risk. Pharmagreen Biotech is currently generating about -0.06 per unit of risk. If you would invest  0.06  in Nextmart on October 4, 2024 and sell it today you would earn a total of  0.00  from holding Nextmart or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Nextmart  vs.  Pharmagreen Biotech

Nextmart

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nextmart are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, Nextmart reported solid returns over the last few months and may actually be approaching a breakup point.

Pharmagreen Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pharmagreen Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Nextmart and Pharmagreen Biotech

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

The idea behind Nextmart and Pharmagreen Biotech 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.