Correlation Between Sarfati and Nextgen
Can any of the company-specific risk be diversified away by investing in both Sarfati and Nextgen 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 Sarfati and Nextgen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sarfati and Nextgen, you can compare the effects of market volatilities on Sarfati and Nextgen 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 Sarfati with a short position of Nextgen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sarfati and Nextgen.
Diversification Opportunities for Sarfati and Nextgen
Good diversification
The 3 months correlation between Sarfati and Nextgen is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Sarfati and Nextgen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextgen and Sarfati 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 Sarfati are associated (or correlated) with Nextgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextgen has no effect on the direction of Sarfati i.e., Sarfati and Nextgen go up and down completely randomly.
Pair Corralation between Sarfati and Nextgen
Assuming the 90 days trading horizon Sarfati is expected to generate 0.23 times more return on investment than Nextgen. However, Sarfati is 4.27 times less risky than Nextgen. It trades about -0.27 of its potential returns per unit of risk. Nextgen is currently generating about -0.08 per unit of risk. If you would invest 441,500 in Sarfati on November 27, 2024 and sell it today you would lose (29,400) from holding Sarfati or give up 6.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sarfati vs. Nextgen
Performance |
| Timeline |
| Sarfati |
| Nextgen |
Sarfati and Nextgen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sarfati and Nextgen
The main advantage of trading using opposite Sarfati and Nextgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sarfati position performs unexpectedly, Nextgen 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 Nextgen will offset losses from the drop in Nextgen's long position.| Sarfati vs. Netanel Group | Sarfati vs. Mivtach Shamir | Sarfati vs. Almogim Holdings | Sarfati vs. Rotem Shani Entrepreneurship |
| Nextgen vs. Unic tech Limited Partnership | Nextgen vs. Priortech | Nextgen vs. Rapac Communication Infrastructure | Nextgen vs. Iargento Hi Tech |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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