Correlation Between Nextgen and Sarfati
Can any of the company-specific risk be diversified away by investing in both Nextgen and Sarfati 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 Nextgen and Sarfati into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nextgen and Sarfati, you can compare the effects of market volatilities on Nextgen and Sarfati 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 Nextgen with a short position of Sarfati. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextgen and Sarfati.
Diversification Opportunities for Nextgen and Sarfati
Good diversification
The 3 months correlation between Nextgen and Sarfati is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Nextgen and Sarfati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarfati and Nextgen 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 Nextgen are associated (or correlated) with Sarfati. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarfati has no effect on the direction of Nextgen i.e., Nextgen and Sarfati go up and down completely randomly.
Pair Corralation between Nextgen and Sarfati
Assuming the 90 days trading horizon Nextgen is expected to under-perform the Sarfati. In addition to that, Nextgen is 3.71 times more volatile than Sarfati. It trades about -0.07 of its total potential returns per unit of risk. Sarfati is currently generating about 0.1 per unit of volatility. If you would invest 213,991 in Sarfati on November 27, 2024 and sell it today you would earn a total of 198,109 from holding Sarfati or generate 92.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nextgen vs. Sarfati
Performance |
| Timeline |
| Nextgen |
| Sarfati |
Nextgen and Sarfati Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nextgen and Sarfati
The main advantage of trading using opposite Nextgen and Sarfati positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextgen position performs unexpectedly, Sarfati 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 Sarfati will offset losses from the drop in Sarfati's long position.| Nextgen vs. Unic tech Limited Partnership | Nextgen vs. Priortech | Nextgen vs. Rapac Communication Infrastructure | Nextgen vs. Iargento Hi Tech |
| Sarfati vs. Netanel Group | Sarfati vs. Mivtach Shamir | Sarfati vs. Almogim Holdings | Sarfati vs. Rotem Shani Entrepreneurship |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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