Correlation Between Sparta Commercial and NextPlat Corp

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

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

Diversification Opportunities for Sparta Commercial and NextPlat Corp

0.47

Correlation Coefficient

Sparta Commercial  NextPlat Corp

Very weak diversification

The 3 months correlation between Sparta and NextPlat is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Commercial Services and NextPlat Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextPlat Corp and Sparta Commercial 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 Sparta Commercial Services are associated (or correlated) with NextPlat Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextPlat Corp has no effect on the direction of Sparta Commercial i.e., Sparta Commercial and NextPlat Corp go up and down completely randomly.

Pair Corralation between Sparta Commercial and NextPlat Corp

Given the investment horizon of 90 days Sparta Commercial is expected to generate 4.12 times less return on investment than NextPlat Corp. But when comparing it to its historical volatility, Sparta Commercial Services is 2.99 times less risky than NextPlat Corp. It trades about 0.12 of its potential returns per unit of risk. NextPlat Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  9.90  in NextPlat Corp on December 30, 2024 and sell it today you would earn a total of  11.10  from holding NextPlat Corp or generate 112.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.32%
Values	Daily Returns

Sparta Commercial Services  vs.  NextPlat Corp

Sparta Commercial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparta Commercial Services are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Sparta Commercial displayed solid returns over the last few months and may actually be approaching a breakup point.

NextPlat Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NextPlat Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, NextPlat Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sparta Commercial and NextPlat Corp

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

The idea behind Sparta Commercial Services and NextPlat Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.