Correlation Between Nextracker and Globalfoundries

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

By analyzing existing cross correlation between Nextracker Class A and Globalfoundries, you can compare the effects of market volatilities on Nextracker and Globalfoundries 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 Nextracker with a short position of Globalfoundries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextracker and Globalfoundries.

Diversification Opportunities for Nextracker and Globalfoundries

0.07

Correlation Coefficient

Nextracker  Globalfoundries

Significant diversification

The 3 months correlation between Nextracker and Globalfoundries is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Nextracker Class A and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries and Nextracker 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 Nextracker Class A are associated (or correlated) with Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of Nextracker i.e., Nextracker and Globalfoundries go up and down completely randomly.

Pair Corralation between Nextracker and Globalfoundries

Considering the 90-day investment horizon Nextracker Class A is expected to generate 1.29 times more return on investment than Globalfoundries. However, Nextracker is 1.29 times more volatile than Globalfoundries. It trades about 0.14 of its potential returns per unit of risk. Globalfoundries is currently generating about 0.07 per unit of risk. If you would invest  3,142  in Nextracker Class A on October 23, 2024 and sell it today you would earn a total of  1,287  from holding Nextracker Class A or generate 40.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Nextracker Class A  vs.  Globalfoundries

Nextracker Class A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nextracker Class A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Nextracker unveiled solid returns over the last few months and may actually be approaching a breakup point.

Globalfoundries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextracker and Globalfoundries

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

The idea behind Nextracker Class A and Globalfoundries 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.