Correlation Between Nextmart and Wialan Technologies

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

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

Diversification Opportunities for Nextmart and Wialan Technologies

0.31

Correlation Coefficient

Nextmart  Wialan Technologies

Weak diversification

The 3 months correlation between Nextmart and Wialan is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Nextmart and Wialan Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wialan Technologies 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 Wialan Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wialan Technologies has no effect on the direction of Nextmart i.e., Nextmart and Wialan Technologies go up and down completely randomly.

Pair Corralation between Nextmart and Wialan Technologies

Given the investment horizon of 90 days Nextmart is expected to generate 6.4 times more return on investment than Wialan Technologies. However, Nextmart is 6.4 times more volatile than Wialan Technologies. It trades about 0.13 of its potential returns per unit of risk. Wialan Technologies is currently generating about 0.01 per unit of risk. If you would invest  0.01  in Nextmart on December 20, 2024 and sell it today you would earn a total of  0.05  from holding Nextmart or generate 500.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Nextmart  vs.  Wialan Technologies

Nextmart

Risk-Adjusted Performance

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.

Wialan Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wialan Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Wialan Technologies is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nextmart and Wialan Technologies

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

The idea behind Nextmart and Wialan Technologies 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.