Correlation Between INEO Tech and Nextmart

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

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

Diversification Opportunities for INEO Tech and Nextmart

0.23

Correlation Coefficient

INEO Tech  Nextmart

Modest diversification

The 3 months correlation between INEO and Nextmart is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding INEO Tech Corp and Nextmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextmart and INEO 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 INEO Tech Corp are associated (or correlated) with Nextmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextmart has no effect on the direction of INEO Tech i.e., INEO Tech and Nextmart go up and down completely randomly.

Pair Corralation between INEO Tech and Nextmart

Assuming the 90 days horizon INEO Tech is expected to generate 12.84 times less return on investment than Nextmart. But when comparing it to its historical volatility, INEO Tech Corp is 3.59 times less risky than Nextmart. It trades about 0.04 of its potential returns per unit of risk. Nextmart is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Nextmart on September 12, 2024 and sell it today you would lose (0.01) from holding Nextmart or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

INEO Tech Corp  vs.  Nextmart

INEO Tech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INEO Tech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Nextmart

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nextmart are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent primary indicators, Nextmart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INEO Tech and Nextmart

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

The idea behind INEO Tech Corp and Nextmart 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.