Correlation Between Gartner and NextTrip

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

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

Diversification Opportunities for Gartner and NextTrip

-0.52

Correlation Coefficient

Gartner  NextTrip

Excellent diversification

The 3 months correlation between Gartner and NextTrip is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Gartner and NextTrip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextTrip and Gartner 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 Gartner are associated (or correlated) with NextTrip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextTrip has no effect on the direction of Gartner i.e., Gartner and NextTrip go up and down completely randomly.

Pair Corralation between Gartner and NextTrip

Allowing for the 90-day total investment horizon Gartner is expected to generate 39.59 times less return on investment than NextTrip. But when comparing it to its historical volatility, Gartner is 11.18 times less risky than NextTrip. It trades about 0.07 of its potential returns per unit of risk. NextTrip is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  185.00  in NextTrip on September 5, 2024 and sell it today you would earn a total of  169.00  from holding NextTrip or generate 91.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Gartner  vs.  NextTrip

Gartner

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gartner are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Gartner may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NextTrip

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NextTrip are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, NextTrip reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gartner and NextTrip

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

The idea behind Gartner and NextTrip 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.