Correlation Between Strauss and Nextferm Technologies

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

By analyzing existing cross correlation between Strauss Group and Nextferm Technologies, you can compare the effects of market volatilities on Strauss and Nextferm Technologies 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 Strauss with a short position of Nextferm Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strauss and Nextferm Technologies.

Diversification Opportunities for Strauss and Nextferm Technologies

-0.74

Correlation Coefficient

Strauss  Nextferm Technologies

Pay attention - limited upside

The 3 months correlation between Strauss and Nextferm is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Strauss Group and Nextferm Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextferm Technologies and Strauss 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 Strauss Group are associated (or correlated) with Nextferm Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextferm Technologies has no effect on the direction of Strauss i.e., Strauss and Nextferm Technologies go up and down completely randomly.

Pair Corralation between Strauss and Nextferm Technologies

Assuming the 90 days trading horizon Strauss Group is expected to generate 0.27 times more return on investment than Nextferm Technologies. However, Strauss Group is 3.67 times less risky than Nextferm Technologies. It trades about 0.23 of its potential returns per unit of risk. Nextferm Technologies is currently generating about -0.18 per unit of risk. If you would invest  574,300  in Strauss Group on September 14, 2024 and sell it today you would earn a total of  150,700  from holding Strauss Group or generate 26.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Strauss Group  vs.  Nextferm Technologies

Strauss Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Strauss Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Strauss sustained solid returns over the last few months and may actually be approaching a breakup point.

Nextferm Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextferm Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Strauss and Nextferm Technologies

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

The idea behind Strauss Group and Nextferm Technologies 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.