Correlation Between Next Generation and Eco Depot

Can any of the company-specific risk be diversified away by investing in both Next Generation and Eco Depot 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 Eco Depot 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 Eco Depot, you can compare the effects of market volatilities on Next Generation and Eco Depot 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 Eco Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Next Generation and Eco Depot.

Diversification Opportunities for Next Generation and Eco Depot

-0.5

Correlation Coefficient

Next Generation  Eco Depot

Very good diversification

The 3 months correlation between Next and Eco is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Next Generation Management and Eco Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco Depot 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 Eco Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco Depot has no effect on the direction of Next Generation i.e., Next Generation and Eco Depot go up and down completely randomly.

Pair Corralation between Next Generation and Eco Depot

Given the investment horizon of 90 days Next Generation Management is expected to generate 1.35 times more return on investment than Eco Depot. However, Next Generation is 1.35 times more volatile than Eco Depot. It trades about 0.08 of its potential returns per unit of risk. Eco Depot is currently generating about -0.02 per unit of risk. If you would invest  0.19  in Next Generation Management on September 4, 2024 and sell it today you would lose (0.03) from holding Next Generation Management or give up 15.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Next Generation Management  vs.  Eco Depot

Next Generation Mana

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Next Generation Management are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Next Generation exhibited solid returns over the last few months and may actually be approaching a breakup point.

Eco Depot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eco Depot has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Next Generation and Eco Depot

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

The idea behind Next Generation Management and Eco Depot 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.