Correlation Between Galileo Tech and Nextgen

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

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

Diversification Opportunities for Galileo Tech and Nextgen

0.79

Correlation Coefficient

Galileo Tech  Nextgen

Poor diversification

The 3 months correlation between Galileo and Nextgen is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Galileo Tech and Nextgen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextgen and Galileo Tech 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 Galileo Tech are associated (or correlated) with Nextgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextgen has no effect on the direction of Galileo Tech i.e., Galileo Tech and Nextgen go up and down completely randomly.

Pair Corralation between Galileo Tech and Nextgen

Assuming the 90 days trading horizon Galileo Tech is expected to under-perform the Nextgen. In addition to that, Galileo Tech is 1.03 times more volatile than Nextgen. It trades about -0.12 of its total potential returns per unit of risk. Nextgen is currently generating about -0.01 per unit of volatility. If you would invest  7,000  in Nextgen on September 16, 2024 and sell it today you would lose (760.00) from holding Nextgen or give up 10.86% of portfolio value over 90 days.

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

Galileo Tech  vs.  Nextgen

Galileo Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galileo Tech 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.

Nextgen

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Galileo Tech and Nextgen

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

The idea behind Galileo Tech and Nextgen 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.