Correlation Between Next Generation and Buildablock Corp

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

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

Diversification Opportunities for Next Generation and Buildablock Corp

0.26

Correlation Coefficient

Next Generation  Buildablock Corp

Modest diversification

The 3 months correlation between Next and Buildablock is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Next Generation Management and Buildablock Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buildablock Corp and Next Generation 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 Next Generation Management are associated (or correlated) with Buildablock Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buildablock Corp has no effect on the direction of Next Generation i.e., Next Generation and Buildablock Corp go up and down completely randomly.

Pair Corralation between Next Generation and Buildablock Corp

If you would invest  0.17  in Next Generation Management on September 15, 2024 and sell it today you would lose (0.02) from holding Next Generation Management or give up 11.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

Next Generation Management  vs.  Buildablock Corp

Next Generation Mana

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Next Generation Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Next Generation exhibited solid returns over the last few months and may actually be approaching a breakup point.

Buildablock Corp

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Buildablock Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite sluggish fundamental drivers, Buildablock Corp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Next Generation and Buildablock Corp

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

The idea behind Next Generation Management and Buildablock Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.