Correlation Between Nextensa and Campine

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

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

Diversification Opportunities for Nextensa and Campine

-0.68

Correlation Coefficient

Nextensa  Campine

Excellent diversification

The 3 months correlation between Nextensa and Campine is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Nextensa NV and Campine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Campine and Nextensa 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 Nextensa NV are associated (or correlated) with Campine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Campine has no effect on the direction of Nextensa i.e., Nextensa and Campine go up and down completely randomly.

Pair Corralation between Nextensa and Campine

Assuming the 90 days trading horizon Nextensa NV is expected to under-perform the Campine. But the stock apears to be less risky and, when comparing its historical volatility, Nextensa NV is 1.38 times less risky than Campine. The stock trades about -0.1 of its potential returns per unit of risk. The Campine is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  8,800  in Campine on September 4, 2024 and sell it today you would earn a total of  250.00  from holding Campine or generate 2.84% return on investment over 90 days.

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

Nextensa NV  vs.  Campine

Nextensa NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextensa NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Campine

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Campine are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Campine is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Nextensa and Campine

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

The idea behind Nextensa NV and Campine 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.