Correlation Between Nextmart and EVIO

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Can any of the company-specific risk be diversified away by investing in both Nextmart and EVIO 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 EVIO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nextmart and EVIO Inc, you can compare the effects of market volatilities on Nextmart and EVIO 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 EVIO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextmart and EVIO.

Diversification Opportunities for Nextmart and EVIO

-0.44
  Correlation Coefficient

Very good diversification

The 3 months correlation between Nextmart and EVIO is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nextmart and EVIO Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVIO Inc 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 EVIO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVIO Inc has no effect on the direction of Nextmart i.e., Nextmart and EVIO go up and down completely randomly.

Pair Corralation between Nextmart and EVIO

Given the investment horizon of 90 days Nextmart is expected to generate 19.83 times less return on investment than EVIO. But when comparing it to its historical volatility, Nextmart is 6.28 times less risky than EVIO. It trades about 0.1 of its potential returns per unit of risk. EVIO Inc is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  0.01  in EVIO Inc on September 24, 2024 and sell it today you would earn a total of  0.00  from holding EVIO Inc or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy98.46%
ValuesDaily Returns

Nextmart  vs.  EVIO Inc

 Performance 
       Timeline  
Nextmart 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
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.
EVIO Inc 

Risk-Adjusted Performance

24 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in EVIO Inc are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent forward indicators, EVIO displayed solid returns over the last few months and may actually be approaching a breakup point.

Nextmart and EVIO Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nextmart and EVIO

The main advantage of trading using opposite Nextmart and EVIO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextmart position performs unexpectedly, EVIO 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 EVIO will offset losses from the drop in EVIO's long position.
The idea behind Nextmart and EVIO Inc 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.
Check out your portfolio center.
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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