Correlation Between Appen and NEXTDC
Can any of the company-specific risk be diversified away by investing in both Appen 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 Appen and NEXTDC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Appen Limited and NEXTDC Limited, you can compare the effects of market volatilities on Appen 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 Appen with a short position of NEXTDC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Appen and NEXTDC.
Diversification Opportunities for Appen and NEXTDC
Average diversification
The 3 months correlation between Appen and NEXTDC is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Appen Limited and NEXTDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXTDC Limited and Appen 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 Appen Limited 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 Limited has no effect on the direction of Appen i.e., Appen and NEXTDC go up and down completely randomly.
Pair Corralation between Appen and NEXTDC
Assuming the 90 days horizon Appen Limited is expected to generate 8.73 times more return on investment than NEXTDC. However, Appen is 8.73 times more volatile than NEXTDC Limited. It trades about 0.08 of its potential returns per unit of risk. NEXTDC Limited is currently generating about 0.13 per unit of risk. If you would invest 110.00 in Appen Limited on September 26, 2024 and sell it today you would earn a total of 34.00 from holding Appen Limited or generate 30.91% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Appen Limited vs. NEXTDC Limited
Performance |
Timeline |
Appen Limited |
NEXTDC Limited |
Appen and NEXTDC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Appen and NEXTDC
The main advantage of trading using opposite Appen and NEXTDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Appen 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.Appen vs. Appen Limited | Appen vs. Direct Communication Solutions | Appen vs. Capgemini SE ADR | Appen vs. Quisitive Technology Solutions |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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