Correlation Between Molson Coors and NEXTDC

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

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

Diversification Opportunities for Molson Coors and NEXTDC

0.09

Correlation Coefficient

Molson Coors  NEXTDC

Significant diversification

The 3 months correlation between Molson and NEXTDC is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Molson Coors Beverage and NEXTDC LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXTDC LTD and Molson Coors 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 Molson Coors Beverage are associated (or correlated) with NEXTDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXTDC LTD has no effect on the direction of Molson Coors i.e., Molson Coors and NEXTDC go up and down completely randomly.

Pair Corralation between Molson Coors and NEXTDC

Assuming the 90 days trading horizon Molson Coors Beverage is expected to generate 0.78 times more return on investment than NEXTDC. However, Molson Coors Beverage is 1.28 times less risky than NEXTDC. It trades about -0.01 of its potential returns per unit of risk. NEXTDC LTD is currently generating about -0.13 per unit of risk. If you would invest  5,714  in Molson Coors Beverage on December 5, 2024 and sell it today you would lose (126.00) from holding Molson Coors Beverage or give up 2.21% of portfolio value over 90 days.

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

Molson Coors Beverage  vs.  NEXTDC LTD

Molson Coors Beverage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Molson Coors Beverage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Molson Coors is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

NEXTDC LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days NEXTDC LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Molson Coors and NEXTDC

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

The idea behind Molson Coors Beverage and NEXTDC LTD 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.