Correlation Between Nextmart and Mydecine Innovations

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

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

Diversification Opportunities for Nextmart and Mydecine Innovations

0.01

Correlation Coefficient

Nextmart  Mydecine Innovations

Significant diversification

The 3 months correlation between Nextmart and Mydecine is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Nextmart and Mydecine Innovations Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mydecine Innovations 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 Mydecine Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mydecine Innovations has no effect on the direction of Nextmart i.e., Nextmart and Mydecine Innovations go up and down completely randomly.

Pair Corralation between Nextmart and Mydecine Innovations

Given the investment horizon of 90 days Nextmart is expected to generate 1.47 times more return on investment than Mydecine Innovations. However, Nextmart is 1.47 times more volatile than Mydecine Innovations Group. It trades about 0.1 of its potential returns per unit of risk. Mydecine Innovations Group is currently generating about 0.12 per unit of risk. If you would invest  0.04  in Nextmart on September 23, 2024 and sell it today you would lose (0.03) from holding Nextmart or give up 75.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Nextmart  vs.  Mydecine Innovations Group

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 inconsistent primary indicators, Nextmart reported solid returns over the last few months and may actually be approaching a breakup point.

Mydecine Innovations

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mydecine Innovations Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Mydecine Innovations reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextmart and Mydecine Innovations

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

The idea behind Nextmart and Mydecine Innovations Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.