Correlation Between Wharf Real and NEXTDC

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

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

Diversification Opportunities for Wharf Real and NEXTDC

-0.39

Correlation Coefficient

Wharf Real  NEXTDC

Very good diversification

The 3 months correlation between Wharf and NEXTDC is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Wharf Real Estate and NEXTDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXTDC Limited and Wharf Real 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 Wharf Real Estate are associated (or correlated) with NEXTDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXTDC Limited has no effect on the direction of Wharf Real i.e., Wharf Real and NEXTDC go up and down completely randomly.

Pair Corralation between Wharf Real and NEXTDC

Assuming the 90 days horizon Wharf Real is expected to generate 17.93 times less return on investment than NEXTDC. In addition to that, Wharf Real is 1.45 times more volatile than NEXTDC Limited. It trades about 0.01 of its total potential returns per unit of risk. NEXTDC Limited is currently generating about 0.23 per unit of volatility. If you would invest  888.00  in NEXTDC Limited on September 25, 2024 and sell it today you would earn a total of  118.00  from holding NEXTDC Limited or generate 13.29% return on investment over 90 days.

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

Wharf Real Estate  vs.  NEXTDC Limited

Wharf Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wharf Real Estate 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 nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

NEXTDC Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NEXTDC Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, NEXTDC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wharf Real and NEXTDC

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

The idea behind Wharf Real Estate and NEXTDC Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.