Correlation Between American Public and NEXT Plc
Can any of the company-specific risk be diversified away by investing in both American Public and NEXT Plc 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 American Public and NEXT Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Public Education and NEXT plc, you can compare the effects of market volatilities on American Public and NEXT Plc 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 American Public with a short position of NEXT Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Public and NEXT Plc.
Diversification Opportunities for American Public and NEXT Plc
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and NEXT is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding American Public Education and NEXT plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXT plc and American Public 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 American Public Education are associated (or correlated) with NEXT Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXT plc has no effect on the direction of American Public i.e., American Public and NEXT Plc go up and down completely randomly.
Pair Corralation between American Public and NEXT Plc
Assuming the 90 days horizon American Public Education is expected to generate 2.52 times more return on investment than NEXT Plc. However, American Public is 2.52 times more volatile than NEXT plc. It trades about 0.43 of its potential returns per unit of risk. NEXT plc is currently generating about -0.12 per unit of risk. If you would invest 1,340 in American Public Education on August 30, 2024 and sell it today you would earn a total of 590.00 from holding American Public Education or generate 44.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Public Education vs. NEXT plc
Performance |
| Timeline |
| American Public Education |
| NEXT plc |
American Public and NEXT Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Public and NEXT Plc
The main advantage of trading using opposite American Public and NEXT Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Public position performs unexpectedly, NEXT Plc 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 NEXT Plc will offset losses from the drop in NEXT Plc's long position.The idea behind American Public Education and NEXT plc 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.| NEXT Plc vs. American Airlines Group | NEXT Plc vs. Aegean Airlines SA | NEXT Plc vs. AEGEAN AIRLINES | NEXT Plc vs. SBM OFFSHORE |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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