Correlation Between Nextmart and Cbd Life

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

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

Diversification Opportunities for Nextmart and Cbd Life

-0.18

Correlation Coefficient

Nextmart  Cbd Life

Good diversification

The 3 months correlation between Nextmart and Cbd is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Nextmart and Cbd Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cbd Life Sciences 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 Cbd Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cbd Life Sciences has no effect on the direction of Nextmart i.e., Nextmart and Cbd Life go up and down completely randomly.

Pair Corralation between Nextmart and Cbd Life

Given the investment horizon of 90 days Nextmart is expected to under-perform the Cbd Life. In addition to that, Nextmart is 1.23 times more volatile than Cbd Life Sciences. It trades about -0.13 of its total potential returns per unit of risk. Cbd Life Sciences is currently generating about 0.01 per unit of volatility. If you would invest  0.05  in Cbd Life Sciences on September 24, 2024 and sell it today you would lose (0.01) from holding Cbd Life Sciences or give up 20.0% of portfolio value over 90 days.

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

Nextmart  vs.  Cbd Life Sciences

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.

Cbd Life Sciences

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cbd Life Sciences are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent fundamental indicators, Cbd Life disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextmart and Cbd Life

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

The idea behind Nextmart and Cbd Life Sciences 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 Transaction History module to view history of all your transactions and understand their impact on performance.