Correlation Between Zonetail and NextPlat Corp

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

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

Diversification Opportunities for Zonetail and NextPlat Corp

0.47

Correlation Coefficient

Zonetail  NextPlat Corp

Very weak diversification

The 3 months correlation between Zonetail and NextPlat is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Zonetail and NextPlat Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextPlat Corp and Zonetail 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 Zonetail 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 Zonetail i.e., Zonetail and NextPlat Corp go up and down completely randomly.

Pair Corralation between Zonetail and NextPlat Corp

Assuming the 90 days horizon Zonetail is expected to generate 3.13 times less return on investment than NextPlat Corp. But when comparing it to its historical volatility, Zonetail is 2.7 times less risky than NextPlat Corp. It trades about 0.14 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	86.15%
Values	Daily Returns

Zonetail  vs.  NextPlat Corp

Zonetail

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zonetail are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, Zonetail reported 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 Zonetail and NextPlat Corp

The main advantage of trading using opposite Zonetail and NextPlat Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zonetail 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 Zonetail 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.