Correlation Between Nextmart and Amazonas Florestal

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

By analyzing existing cross correlation between Nextmart and Amazonas Florestal, you can compare the effects of market volatilities on Nextmart and Amazonas Florestal 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 Amazonas Florestal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextmart and Amazonas Florestal.

Diversification Opportunities for Nextmart and Amazonas Florestal

0.13

Correlation Coefficient

Nextmart  Amazonas Florestal

Average diversification

The 3 months correlation between Nextmart and Amazonas is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Nextmart and Amazonas Florestal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazonas Florestal 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 Amazonas Florestal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazonas Florestal has no effect on the direction of Nextmart i.e., Nextmart and Amazonas Florestal go up and down completely randomly.

Pair Corralation between Nextmart and Amazonas Florestal

Given the investment horizon of 90 days Nextmart is expected to under-perform the Amazonas Florestal. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nextmart is 14.68 times less risky than Amazonas Florestal. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Amazonas Florestal is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Amazonas Florestal on September 24, 2024 and sell it today you would earn a total of  0.00  from holding Amazonas Florestal or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Nextmart  vs.  Amazonas Florestal

Nextmart

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nextmart are ranked lower than 7 (%) 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.

Amazonas Florestal

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazonas Florestal are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent technical and fundamental indicators, Amazonas Florestal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextmart and Amazonas Florestal

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

The idea behind Nextmart and Amazonas Florestal 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.