Correlation Between NextPlat Corp and Social Life

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

By analyzing existing cross correlation between NextPlat Corp and Social Life Network, you can compare the effects of market volatilities on NextPlat Corp and Social 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 NextPlat Corp with a short position of Social Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of NextPlat Corp and Social Life.

Diversification Opportunities for NextPlat Corp and Social Life

0.42

Correlation Coefficient

NextPlat Corp  Social Life

Very weak diversification

The 3 months correlation between NextPlat and Social is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding NextPlat Corp and Social Life Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Social Life Network and NextPlat Corp 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 NextPlat Corp are associated (or correlated) with Social Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Social Life Network has no effect on the direction of NextPlat Corp i.e., NextPlat Corp and Social Life go up and down completely randomly.

Pair Corralation between NextPlat Corp and Social Life

Assuming the 90 days horizon NextPlat Corp is expected to under-perform the Social Life. But the stock apears to be less risky and, when comparing its historical volatility, NextPlat Corp is 1.24 times less risky than Social Life. The stock trades about -0.03 of its potential returns per unit of risk. The Social Life Network is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Social Life Network on September 22, 2024 and sell it today you would lose (0.01) from holding Social Life Network or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	79.69%
Values	Daily Returns

NextPlat Corp  vs.  Social Life Network

NextPlat Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NextPlat Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's essential indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Social Life Network

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Social Life Network are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, Social Life reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NextPlat Corp and Social Life

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

The idea behind NextPlat Corp and Social Life Network 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.