Correlation Between Baxter International and NexGel Warrant

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

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

Diversification Opportunities for Baxter International and NexGel Warrant

0.01

Correlation Coefficient

Baxter International  NexGel Warrant

Significant diversification

The 3 months correlation between Baxter and NexGel is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Baxter International and NexGel Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGel Warrant and Baxter International 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 Baxter International are associated (or correlated) with NexGel Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexGel Warrant has no effect on the direction of Baxter International i.e., Baxter International and NexGel Warrant go up and down completely randomly.

Pair Corralation between Baxter International and NexGel Warrant

Considering the 90-day investment horizon Baxter International is expected to under-perform the NexGel Warrant. But the stock apears to be less risky and, when comparing its historical volatility, Baxter International is 7.42 times less risky than NexGel Warrant. The stock trades about -0.15 of its potential returns per unit of risk. The NexGel Warrant is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  49.00  in NexGel Warrant on September 5, 2024 and sell it today you would lose (1.00) from holding NexGel Warrant or give up 2.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	79.69%
Values	Daily Returns

Baxter International  vs.  NexGel Warrant

Baxter International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baxter International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly 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.

NexGel Warrant

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NexGel Warrant are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, NexGel Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baxter International and NexGel Warrant

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

The idea behind Baxter International and NexGel Warrant 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.