Correlation Between Nextmart and Green Cures

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

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

Diversification Opportunities for Nextmart and Green Cures

-0.11

Correlation Coefficient

Nextmart  Green Cures

Good diversification

The 3 months correlation between Nextmart and Green is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Nextmart and Green Cures Botanical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Cures Botanical 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 Green Cures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Cures Botanical has no effect on the direction of Nextmart i.e., Nextmart and Green Cures go up and down completely randomly.

Pair Corralation between Nextmart and Green Cures

Given the investment horizon of 90 days Nextmart is expected to generate 2.52 times less return on investment than Green Cures. But when comparing it to its historical volatility, Nextmart is 1.03 times less risky than Green Cures. It trades about 0.1 of its potential returns per unit of risk. Green Cures Botanical is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Green Cures Botanical on September 25, 2024 and sell it today you would earn a total of  0.01  from holding Green Cures Botanical or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Nextmart  vs.  Green Cures Botanical

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.

Green Cures Botanical

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Green Cures Botanical are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental indicators, Green Cures unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextmart and Green Cures

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

The idea behind Nextmart and Green Cures Botanical 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.