Correlation Between Rapac Communication and Nextgen

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

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

Diversification Opportunities for Rapac Communication and Nextgen

-0.63

Correlation Coefficient

Rapac Communication  Nextgen

Excellent diversification

The 3 months correlation between Rapac and Nextgen is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Rapac Communication Infrastruc and Nextgen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextgen and Rapac Communication 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 Rapac Communication Infrastructure are associated (or correlated) with Nextgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextgen has no effect on the direction of Rapac Communication i.e., Rapac Communication and Nextgen go up and down completely randomly.

Pair Corralation between Rapac Communication and Nextgen

Assuming the 90 days trading horizon Rapac Communication Infrastructure is expected to generate 0.28 times more return on investment than Nextgen. However, Rapac Communication Infrastructure is 3.62 times less risky than Nextgen. It trades about 0.14 of its potential returns per unit of risk. Nextgen is currently generating about -0.01 per unit of risk. If you would invest  257,700  in Rapac Communication Infrastructure on September 14, 2024 and sell it today you would earn a total of  26,500  from holding Rapac Communication Infrastructure or generate 10.28% return on investment over 90 days.

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

Rapac Communication Infrastruc  vs.  Nextgen

Rapac Communication

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rapac Communication Infrastructure are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rapac Communication sustained solid returns over the last few months and may actually be approaching a breakup point.

Nextgen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextgen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nextgen is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rapac Communication and Nextgen

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

The idea behind Rapac Communication Infrastructure and Nextgen 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.