Correlation Between Goff Corp and Nextmart

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

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

Diversification Opportunities for Goff Corp and Nextmart

-0.13

Correlation Coefficient

Goff Corp  Nextmart

Good diversification

The 3 months correlation between Goff and Nextmart is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Goff Corp and Nextmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextmart and Goff 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 Goff Corp are associated (or correlated) with Nextmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextmart has no effect on the direction of Goff Corp i.e., Goff Corp and Nextmart go up and down completely randomly.

Pair Corralation between Goff Corp and Nextmart

Given the investment horizon of 90 days Goff Corp is expected to generate 2.01 times more return on investment than Nextmart. However, Goff Corp is 2.01 times more volatile than Nextmart. It trades about 0.21 of its potential returns per unit of risk. Nextmart is currently generating about -0.13 per unit of risk. If you would invest  0.90  in Goff Corp on September 23, 2024 and sell it today you would earn a total of  1.50  from holding Goff Corp or generate 166.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Goff Corp  vs.  Nextmart

Goff Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goff Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Goff Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Goff Corp and Nextmart

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

The idea behind Goff Corp and Nextmart 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.