Correlation Between Sam A and NewFlex Technology

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

By analyzing existing cross correlation between Sam A Pharm Co and NewFlex Technology Co, you can compare the effects of market volatilities on Sam A and NewFlex Technology 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 Sam A with a short position of NewFlex Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sam A and NewFlex Technology.

Diversification Opportunities for Sam A and NewFlex Technology

0.38

Correlation Coefficient

Sam A  NewFlex Technology

Weak diversification

The 3 months correlation between Sam and NewFlex is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sam A Pharm Co and NewFlex Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewFlex Technology and Sam A 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 Sam A Pharm Co are associated (or correlated) with NewFlex Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewFlex Technology has no effect on the direction of Sam A i.e., Sam A and NewFlex Technology go up and down completely randomly.

Pair Corralation between Sam A and NewFlex Technology

Assuming the 90 days trading horizon Sam A Pharm Co is expected to under-perform the NewFlex Technology. But the stock apears to be less risky and, when comparing its historical volatility, Sam A Pharm Co is 2.3 times less risky than NewFlex Technology. The stock trades about -0.23 of its potential returns per unit of risk. The NewFlex Technology Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  469,000  in NewFlex Technology Co on September 4, 2024 and sell it today you would lose (20,000) from holding NewFlex Technology Co or give up 4.26% of portfolio value over 90 days.

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

Sam A Pharm Co  vs.  NewFlex Technology Co

Sam A Pharm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sam A Pharm Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NewFlex Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sam A and NewFlex Technology

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

The idea behind Sam A Pharm Co and NewFlex Technology Co 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.

Check out your portfolio center.

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.