Correlation Between Nextmart and Alliance Global

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

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

Diversification Opportunities for Nextmart and Alliance Global

0.36

Correlation Coefficient

Nextmart  Alliance Global

Weak diversification

The 3 months correlation between Nextmart and Alliance is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Nextmart and Alliance Global Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Global Group and Nextmart 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 Nextmart are associated (or correlated) with Alliance Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Global Group has no effect on the direction of Nextmart i.e., Nextmart and Alliance Global go up and down completely randomly.

Pair Corralation between Nextmart and Alliance Global

Given the investment horizon of 90 days Nextmart is expected to generate 19.32 times more return on investment than Alliance Global. However, Nextmart is 19.32 times more volatile than Alliance Global Group. It trades about 0.08 of its potential returns per unit of risk. Alliance Global Group is currently generating about -0.03 per unit of risk. If you would invest  1.18  in Nextmart on September 29, 2024 and sell it today you would lose (1.12) from holding Nextmart or give up 94.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	89.56%
Values	Daily Returns

Nextmart  vs.  Alliance Global Group

Nextmart

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nextmart are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Nextmart reported solid returns over the last few months and may actually be approaching a breakup point.

Alliance Global Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Global Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Nextmart and Alliance Global

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

The idea behind Nextmart and Alliance Global Group 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.