Correlation Between Lahav LR and Nextgen

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

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

Diversification Opportunities for Lahav LR and Nextgen

-0.78

Correlation Coefficient

Lahav LR  Nextgen

Pay attention - limited upside

The 3 months correlation between Lahav and Nextgen is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Lahav LR Real and Nextgen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextgen and Lahav LR 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 Lahav LR Real 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 Lahav LR i.e., Lahav LR and Nextgen go up and down completely randomly.

Pair Corralation between Lahav LR and Nextgen

Assuming the 90 days trading horizon Lahav LR Real is expected to generate 0.32 times more return on investment than Nextgen. However, Lahav LR Real is 3.16 times less risky than Nextgen. It trades about 0.39 of its potential returns per unit of risk. Nextgen is currently generating about -0.02 per unit of risk. If you would invest  46,000  in Lahav LR Real on September 27, 2024 and sell it today you would earn a total of  4,920  from holding Lahav LR Real or generate 10.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Lahav LR Real  vs.  Nextgen

Lahav LR Real

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Lahav LR Real are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Lahav LR unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 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.

Pair Trading with Lahav LR and Nextgen

The main advantage of trading using opposite Lahav LR and Nextgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lahav LR 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 Lahav LR Real 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..