Correlation Between Nextcom and Endymed

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

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

Diversification Opportunities for Nextcom and Endymed

0.51

Correlation Coefficient

Nextcom  Endymed

Very weak diversification

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

Pair Corralation between Nextcom and Endymed

Assuming the 90 days trading horizon Nextcom is expected to generate 2.46 times less return on investment than Endymed. But when comparing it to its historical volatility, Nextcom is 1.88 times less risky than Endymed. It trades about 0.01 of its potential returns per unit of risk. Endymed is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  32,000  in Endymed on September 4, 2024 and sell it today you would lose (2,800) from holding Endymed or give up 8.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.47%
Values	Daily Returns

Nextcom  vs.  Endymed

Nextcom

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nextcom are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nextcom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Endymed

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Endymed are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Endymed sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextcom and Endymed

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

The idea behind Nextcom and Endymed 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.