Correlation Between Nextcom and Israel China
Can any of the company-specific risk be diversified away by investing in both Nextcom and Israel China 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 Nextcom and Israel China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nextcom and Israel China Biotechnology, you can compare the effects of market volatilities on Nextcom and Israel China 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 Nextcom with a short position of Israel China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextcom and Israel China.
Diversification Opportunities for Nextcom and Israel China
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nextcom and Israel is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nextcom and Israel China Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel China Biotech and Nextcom 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 Nextcom are associated (or correlated) with Israel China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel China Biotech has no effect on the direction of Nextcom i.e., Nextcom and Israel China go up and down completely randomly.
Pair Corralation between Nextcom and Israel China
Assuming the 90 days trading horizon Nextcom is expected to generate 22.61 times less return on investment than Israel China. But when comparing it to its historical volatility, Nextcom is 15.13 times less risky than Israel China. It trades about 0.04 of its potential returns per unit of risk. Israel China Biotechnology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 12,300 in Israel China Biotechnology on September 2, 2024 and sell it today you would earn a total of 41,990 from holding Israel China Biotechnology or generate 341.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nextcom vs. Israel China Biotechnology
Performance |
| Timeline |
| Nextcom |
| Israel China Biotech |
Nextcom and Israel China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nextcom and Israel China
The main advantage of trading using opposite Nextcom and Israel China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextcom position performs unexpectedly, Israel China 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 Israel China will offset losses from the drop in Israel China's long position.| Nextcom vs. Israel China Biotechnology | Nextcom vs. The Gold Bond | Nextcom vs. Overseas Commerce | Nextcom vs. Big Tech 50 |
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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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