Correlation Between Ball and NEXE Innovations

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

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

Diversification Opportunities for Ball and NEXE Innovations

-0.63

Correlation Coefficient

Ball  NEXE Innovations

Excellent diversification

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

Pair Corralation between Ball and NEXE Innovations

Given the investment horizon of 90 days Ball Corporation is expected to under-perform the NEXE Innovations. But the stock apears to be less risky and, when comparing its historical volatility, Ball Corporation is 2.75 times less risky than NEXE Innovations. The stock trades about -0.2 of its potential returns per unit of risk. The NEXE Innovations is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  30.00  in NEXE Innovations on September 14, 2024 and sell it today you would earn a total of  1.00  from holding NEXE Innovations or generate 3.33% return on investment over 90 days.

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

Ball Corp.  vs.  NEXE Innovations

Ball

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ball Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

NEXE Innovations

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NEXE Innovations are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, NEXE Innovations reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ball and NEXE Innovations

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

The idea behind Ball Corporation and NEXE Innovations 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.