Correlation Between NEXTEER AUTOMOTIVE and SCOTT TECHNOLOGY
Can any of the company-specific risk be diversified away by investing in both NEXTEER AUTOMOTIVE and SCOTT TECHNOLOGY 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 NEXTEER AUTOMOTIVE and SCOTT TECHNOLOGY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEXTEER AUTOMOTIVE and SCOTT TECHNOLOGY, you can compare the effects of market volatilities on NEXTEER AUTOMOTIVE and SCOTT TECHNOLOGY 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 NEXTEER AUTOMOTIVE with a short position of SCOTT TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEXTEER AUTOMOTIVE and SCOTT TECHNOLOGY.
Diversification Opportunities for NEXTEER AUTOMOTIVE and SCOTT TECHNOLOGY
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NEXTEER and SCOTT is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NEXTEER AUTOMOTIVE and SCOTT TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOTT TECHNOLOGY and NEXTEER AUTOMOTIVE 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 NEXTEER AUTOMOTIVE are associated (or correlated) with SCOTT TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOTT TECHNOLOGY has no effect on the direction of NEXTEER AUTOMOTIVE i.e., NEXTEER AUTOMOTIVE and SCOTT TECHNOLOGY go up and down completely randomly.
Pair Corralation between NEXTEER AUTOMOTIVE and SCOTT TECHNOLOGY
Assuming the 90 days horizon NEXTEER AUTOMOTIVE is expected to generate 2.52 times more return on investment than SCOTT TECHNOLOGY. However, NEXTEER AUTOMOTIVE is 2.52 times more volatile than SCOTT TECHNOLOGY. It trades about 0.11 of its potential returns per unit of risk. SCOTT TECHNOLOGY is currently generating about 0.17 per unit of risk. If you would invest 37.00 in NEXTEER AUTOMOTIVE on September 13, 2024 and sell it today you would earn a total of 5.00 from holding NEXTEER AUTOMOTIVE or generate 13.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NEXTEER AUTOMOTIVE vs. SCOTT TECHNOLOGY
Performance |
| Timeline |
| NEXTEER AUTOMOTIVE |
| SCOTT TECHNOLOGY |
NEXTEER AUTOMOTIVE and SCOTT TECHNOLOGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NEXTEER AUTOMOTIVE and SCOTT TECHNOLOGY
The main advantage of trading using opposite NEXTEER AUTOMOTIVE and SCOTT TECHNOLOGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEXTEER AUTOMOTIVE position performs unexpectedly, SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY will offset losses from the drop in SCOTT TECHNOLOGY's long position.| NEXTEER AUTOMOTIVE vs. Japan Tobacco | NEXTEER AUTOMOTIVE vs. JAPAN TOBACCO UNSPADR12 | NEXTEER AUTOMOTIVE vs. BRIT AMER TOBACCO | NEXTEER AUTOMOTIVE vs. Corporate Office Properties |
| SCOTT TECHNOLOGY vs. Apple Inc | SCOTT TECHNOLOGY vs. Apple Inc | SCOTT TECHNOLOGY vs. Apple Inc | SCOTT TECHNOLOGY vs. Apple Inc |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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