Correlation Between Nextmart and Bionoid Pharma

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

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

Diversification Opportunities for Nextmart and Bionoid Pharma

-0.05

Correlation Coefficient

Nextmart  Bionoid Pharma

Good diversification

The 3 months correlation between Nextmart and Bionoid is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Nextmart and Bionoid Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bionoid Pharma 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 Bionoid Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bionoid Pharma has no effect on the direction of Nextmart i.e., Nextmart and Bionoid Pharma go up and down completely randomly.

Pair Corralation between Nextmart and Bionoid Pharma

Given the investment horizon of 90 days Nextmart is expected to generate 3.77 times less return on investment than Bionoid Pharma. In addition to that, Nextmart is 1.18 times more volatile than Bionoid Pharma. It trades about 0.03 of its total potential returns per unit of risk. Bionoid Pharma is currently generating about 0.11 per unit of volatility. If you would invest  25.00  in Bionoid Pharma on September 25, 2024 and sell it today you would earn a total of  0.00  from holding Bionoid Pharma or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Nextmart  vs.  Bionoid Pharma

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.

Bionoid Pharma

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bionoid Pharma are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Bionoid Pharma reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextmart and Bionoid Pharma

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

The idea behind Nextmart and Bionoid Pharma 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.