Correlation Between Discount Investment and Nextgen
Can any of the company-specific risk be diversified away by investing in both Discount Investment and Nextgen 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 Discount Investment and Nextgen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Discount Investment Corp and Nextgen, you can compare the effects of market volatilities on Discount Investment and Nextgen 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 Discount Investment with a short position of Nextgen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discount Investment and Nextgen.
Diversification Opportunities for Discount Investment and Nextgen
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Discount and Nextgen is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Discount Investment Corp and Nextgen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextgen and Discount Investment 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 Discount Investment Corp are associated (or correlated) with Nextgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextgen has no effect on the direction of Discount Investment i.e., Discount Investment and Nextgen go up and down completely randomly.
Pair Corralation between Discount Investment and Nextgen
Assuming the 90 days trading horizon Discount Investment Corp is expected to generate 0.46 times more return on investment than Nextgen. However, Discount Investment Corp is 2.2 times less risky than Nextgen. It trades about 0.04 of its potential returns per unit of risk. Nextgen is currently generating about -0.08 per unit of risk. If you would invest 35,900 in Discount Investment Corp on September 2, 2024 and sell it today you would earn a total of 10,870 from holding Discount Investment Corp or generate 30.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discount Investment Corp vs. Nextgen
Performance |
| Timeline |
| Discount Investment Corp |
| Nextgen |
Discount Investment and Nextgen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discount Investment and Nextgen
The main advantage of trading using opposite Discount Investment and Nextgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discount Investment position performs unexpectedly, Nextgen 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 Nextgen will offset losses from the drop in Nextgen's long position.| Discount Investment vs. Arad | Discount Investment vs. Alony Hetz Properties | Discount Investment vs. Airport City | Discount Investment vs. Harel Insurance Investments |
| Nextgen vs. Magic Software Enterprises | Nextgen vs. Batm Advanced Communications | Nextgen vs. B Communications | Nextgen vs. Computer Direct |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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