Correlation Between Nextcom and Schnapp

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

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

Diversification Opportunities for Nextcom and Schnapp

0.8

Correlation Coefficient

Nextcom  Schnapp

Very poor diversification

The 3 months correlation between Nextcom and Schnapp is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Nextcom and Schnapp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schnapp 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 Schnapp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schnapp has no effect on the direction of Nextcom i.e., Nextcom and Schnapp go up and down completely randomly.

Pair Corralation between Nextcom and Schnapp

Assuming the 90 days trading horizon Nextcom is expected to generate 3.37 times less return on investment than Schnapp. But when comparing it to its historical volatility, Nextcom is 1.09 times less risky than Schnapp. It trades about 0.19 of its potential returns per unit of risk. Schnapp is currently generating about 0.58 of returns per unit of risk over similar time horizon. If you would invest  159,700  in Schnapp on December 2, 2024 and sell it today you would earn a total of  32,700  from holding Schnapp or generate 20.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Nextcom  vs.  Schnapp

Nextcom

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Nextcom are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nextcom sustained solid returns over the last few months and may actually be approaching a breakup point.

Schnapp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Schnapp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Schnapp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextcom and Schnapp

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

The idea behind Nextcom and Schnapp 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.