Correlation Between One World and Nextmart
Can any of the company-specific risk be diversified away by investing in both One World and Nextmart 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 One World and Nextmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between One World Universe and Nextmart, you can compare the effects of market volatilities on One World and Nextmart 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 One World with a short position of Nextmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of One World and Nextmart.
Diversification Opportunities for One World and Nextmart
Good diversification
The 3 months correlation between One and Nextmart is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding One World Universe and Nextmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextmart and One World 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 One World Universe are associated (or correlated) with Nextmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextmart has no effect on the direction of One World i.e., One World and Nextmart go up and down completely randomly.
Pair Corralation between One World and Nextmart
Given the investment horizon of 90 days One World is expected to generate 5.84 times less return on investment than Nextmart. But when comparing it to its historical volatility, One World Universe is 2.8 times less risky than Nextmart. It trades about 0.04 of its potential returns per unit of risk. Nextmart is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1.66 in Nextmart on August 25, 2024 and sell it today you would lose (1.62) from holding Nextmart or give up 97.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
One World Universe vs. Nextmart
Performance |
| Timeline |
| One World Universe |
| Nextmart |
One World and Nextmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with One World and Nextmart
The main advantage of trading using opposite One World and Nextmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if One World position performs unexpectedly, Nextmart 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 Nextmart will offset losses from the drop in Nextmart's long position.| One World vs. TOMI Environmental Solutions | One World vs. Zurn Elkay Water | One World vs. Federal Signal | One World vs. Energy Recovery |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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