Correlation Between Analog Devices and Nextplat Corp
Can any of the company-specific risk be diversified away by investing in both Analog Devices and Nextplat Corp 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 Analog Devices and Nextplat Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Analog Devices and Nextplat Corp, you can compare the effects of market volatilities on Analog Devices and Nextplat Corp 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 Analog Devices with a short position of Nextplat Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and Nextplat Corp.
Diversification Opportunities for Analog Devices and Nextplat Corp
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Analog and Nextplat is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Nextplat Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextplat Corp and Analog Devices 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 Analog Devices are associated (or correlated) with Nextplat Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextplat Corp has no effect on the direction of Analog Devices i.e., Analog Devices and Nextplat Corp go up and down completely randomly.
Pair Corralation between Analog Devices and Nextplat Corp
Considering the 90-day investment horizon Analog Devices is expected to generate 0.41 times more return on investment than Nextplat Corp. However, Analog Devices is 2.45 times less risky than Nextplat Corp. It trades about 0.04 of its potential returns per unit of risk. Nextplat Corp is currently generating about -0.03 per unit of risk. If you would invest 17,112 in Analog Devices on August 27, 2024 and sell it today you would earn a total of 4,347 from holding Analog Devices or generate 25.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Analog Devices vs. Nextplat Corp
Performance |
| Timeline |
| Analog Devices |
| Nextplat Corp |
Analog Devices and Nextplat Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Analog Devices and Nextplat Corp
The main advantage of trading using opposite Analog Devices and Nextplat Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices position performs unexpectedly, Nextplat Corp 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 Nextplat Corp will offset losses from the drop in Nextplat Corp's long position.The idea behind Analog Devices and Nextplat Corp 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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