Correlation Between GX AI and NEXG11

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Can any of the company-specific risk be diversified away by investing in both GX AI and NEXG11 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 GX AI and NEXG11 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GX AI TECH and NEXG11, you can compare the effects of market volatilities on GX AI and NEXG11 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 GX AI with a short position of NEXG11. Check out your portfolio center. Please also check ongoing floating volatility patterns of GX AI and NEXG11.

Diversification Opportunities for GX AI and NEXG11

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between BAIQ39 and NEXG11 is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding GX AI TECH and NEXG11 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXG11 and GX AI 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 GX AI TECH are associated (or correlated) with NEXG11. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXG11 has no effect on the direction of GX AI i.e., GX AI and NEXG11 go up and down completely randomly.

Pair Corralation between GX AI and NEXG11

Assuming the 90 days trading horizon GX AI TECH is expected to generate 3.88 times more return on investment than NEXG11. However, GX AI is 3.88 times more volatile than NEXG11. It trades about 0.14 of its potential returns per unit of risk. NEXG11 is currently generating about 0.33 per unit of risk. If you would invest  4,745  in GX AI TECH on September 20, 2024 and sell it today you would earn a total of  3,423  from holding GX AI TECH or generate 72.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy94.24%
ValuesDaily Returns

GX AI TECH  vs.  NEXG11

 Performance 
       Timeline  
GX AI TECH 

Risk-Adjusted Performance

23 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in GX AI TECH are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, GX AI sustained solid returns over the last few months and may actually be approaching a breakup point.
NEXG11 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in NEXG11 are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NEXG11 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GX AI and NEXG11 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GX AI and NEXG11

The main advantage of trading using opposite GX AI and NEXG11 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GX AI position performs unexpectedly, NEXG11 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 NEXG11 will offset losses from the drop in NEXG11's long position.
The idea behind GX AI TECH and NEXG11 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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