Correlation Between Nextmart and Takeda Pharmaceutical

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

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

Diversification Opportunities for Nextmart and Takeda Pharmaceutical

0.15

Correlation Coefficient

Nextmart  Takeda Pharmaceutical

Average diversification

The 3 months correlation between Nextmart and Takeda is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Nextmart and Takeda Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Takeda Pharmaceutical 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 Takeda Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Takeda Pharmaceutical has no effect on the direction of Nextmart i.e., Nextmart and Takeda Pharmaceutical go up and down completely randomly.

Pair Corralation between Nextmart and Takeda Pharmaceutical

If you would invest  2,617  in Takeda Pharmaceutical Co on December 11, 2024 and sell it today you would earn a total of  505.00  from holding Takeda Pharmaceutical Co or generate 19.3% return on investment over 90 days.

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

Nextmart  vs.  Takeda Pharmaceutical Co

Nextmart

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nextmart are ranked lower than 8 (%) 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.

Takeda Pharmaceutical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Takeda Pharmaceutical Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Takeda Pharmaceutical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextmart and Takeda Pharmaceutical

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

The idea behind Nextmart and Takeda Pharmaceutical Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.