Correlation Between Goodtech and Next Biometrics
Can any of the company-specific risk be diversified away by investing in both Goodtech and Next Biometrics 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 Goodtech and Next Biometrics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Goodtech and Next Biometrics Group, you can compare the effects of market volatilities on Goodtech and Next Biometrics 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 Goodtech with a short position of Next Biometrics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodtech and Next Biometrics.
Diversification Opportunities for Goodtech and Next Biometrics
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Goodtech and Next is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Goodtech and Next Biometrics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Biometrics Group and Goodtech 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 Goodtech are associated (or correlated) with Next Biometrics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Biometrics Group has no effect on the direction of Goodtech i.e., Goodtech and Next Biometrics go up and down completely randomly.
Pair Corralation between Goodtech and Next Biometrics
Assuming the 90 days trading horizon Goodtech is expected to generate 0.7 times more return on investment than Next Biometrics. However, Goodtech is 1.42 times less risky than Next Biometrics. It trades about -0.16 of its potential returns per unit of risk. Next Biometrics Group is currently generating about -0.12 per unit of risk. If you would invest 990.00 in Goodtech on September 1, 2024 and sell it today you would lose (64.00) from holding Goodtech or give up 6.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Goodtech vs. Next Biometrics Group
Performance |
| Timeline |
| Goodtech |
| Next Biometrics Group |
Goodtech and Next Biometrics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodtech and Next Biometrics
The main advantage of trading using opposite Goodtech and Next Biometrics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodtech position performs unexpectedly, Next Biometrics 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 Biometrics will offset losses from the drop in Next Biometrics' long position.| Goodtech vs. Eidesvik Offshore ASA | Goodtech vs. Borgestad A | Goodtech vs. Kitron ASA | Goodtech vs. Havila Shipping ASA |
| Next Biometrics vs. Idex ASA | Next Biometrics vs. XXL ASA | Next Biometrics vs. Bergenbio ASA | Next Biometrics vs. Precise Biometrics AB |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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