Correlation Between Nextmart and Emergent Health
Can any of the company-specific risk be diversified away by investing in both Nextmart and Emergent Health 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 Nextmart and Emergent Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nextmart and Emergent Health Corp, you can compare the effects of market volatilities on Nextmart and Emergent Health 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 Nextmart with a short position of Emergent Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextmart and Emergent Health.
Diversification Opportunities for Nextmart and Emergent Health
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nextmart and Emergent is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Nextmart and Emergent Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emergent Health Corp and Nextmart 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 Nextmart are associated (or correlated) with Emergent Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emergent Health Corp has no effect on the direction of Nextmart i.e., Nextmart and Emergent Health go up and down completely randomly.
Pair Corralation between Nextmart and Emergent Health
Given the investment horizon of 90 days Nextmart is expected to generate 4.62 times more return on investment than Emergent Health. However, Nextmart is 4.62 times more volatile than Emergent Health Corp. It trades about 0.12 of its potential returns per unit of risk. Emergent Health Corp is currently generating about -0.12 per unit of risk. If you would invest 0.04 in Nextmart on August 29, 2024 and sell it today you would earn a total of 0.00 from holding Nextmart or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nextmart vs. Emergent Health Corp
Performance |
| Timeline |
| Nextmart |
| Emergent Health Corp |
Nextmart and Emergent Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nextmart and Emergent Health
The main advantage of trading using opposite Nextmart and Emergent Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextmart position performs unexpectedly, Emergent Health 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 Emergent Health will offset losses from the drop in Emergent Health's long position.The idea behind Nextmart and Emergent Health 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.| Emergent Health vs. Galexxy Holdings | Emergent Health vs. Integrated Cannabis Solutions | Emergent Health vs. Golden Developing Solutions | Emergent Health vs. Premier Biomedical |
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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