Correlation Between Automatic Bank and Nextage Therapeutics
Can any of the company-specific risk be diversified away by investing in both Automatic Bank and Nextage Therapeutics 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 Automatic Bank and Nextage Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Automatic Bank Services and Nextage Therapeutics, you can compare the effects of market volatilities on Automatic Bank and Nextage Therapeutics 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 Automatic Bank with a short position of Nextage Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Bank and Nextage Therapeutics.
Diversification Opportunities for Automatic Bank and Nextage Therapeutics
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Automatic and Nextage is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Bank Services and Nextage Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextage Therapeutics and Automatic Bank 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 Automatic Bank Services are associated (or correlated) with Nextage Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextage Therapeutics has no effect on the direction of Automatic Bank i.e., Automatic Bank and Nextage Therapeutics go up and down completely randomly.
Pair Corralation between Automatic Bank and Nextage Therapeutics
Assuming the 90 days trading horizon Automatic Bank is expected to generate 2.53 times less return on investment than Nextage Therapeutics. But when comparing it to its historical volatility, Automatic Bank Services is 3.91 times less risky than Nextage Therapeutics. It trades about 0.07 of its potential returns per unit of risk. Nextage Therapeutics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5,960 in Nextage Therapeutics on September 3, 2024 and sell it today you would earn a total of 1,240 from holding Nextage Therapeutics or generate 20.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.74% |
| Values | Daily Returns |
Automatic Bank Services vs. Nextage Therapeutics
Performance |
| Timeline |
| Automatic Bank Services |
| Nextage Therapeutics |
Automatic Bank and Nextage Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Bank and Nextage Therapeutics
The main advantage of trading using opposite Automatic Bank and Nextage Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Bank position performs unexpectedly, Nextage Therapeutics 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 Nextage Therapeutics will offset losses from the drop in Nextage Therapeutics' long position.The idea behind Automatic Bank Services and Nextage Therapeutics 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.| Nextage Therapeutics vs. First International Bank | Nextage Therapeutics vs. Automatic Bank Services | Nextage Therapeutics vs. Bank Leumi Le Israel | Nextage Therapeutics vs. B Communications |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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