Correlation Between XXL ASA and Next Biometrics
Can any of the company-specific risk be diversified away by investing in both XXL ASA and Next Biometrics 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 XXL ASA and Next Biometrics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XXL ASA and Next Biometrics Group, you can compare the effects of market volatilities on XXL ASA and Next Biometrics 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 XXL ASA with a short position of Next Biometrics. Check out your portfolio center. Please also check ongoing floating volatility patterns of XXL ASA and Next Biometrics.
Diversification Opportunities for XXL ASA and Next Biometrics
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between XXL and Next is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding XXL ASA and Next Biometrics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Biometrics Group and XXL ASA 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 XXL ASA are associated (or correlated) with Next Biometrics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Biometrics Group has no effect on the direction of XXL ASA i.e., XXL ASA and Next Biometrics go up and down completely randomly.
Pair Corralation between XXL ASA and Next Biometrics
Assuming the 90 days trading horizon XXL ASA is expected to under-perform the Next Biometrics. In addition to that, XXL ASA is 2.52 times more volatile than Next Biometrics Group. It trades about -0.06 of its total potential returns per unit of risk. Next Biometrics Group is currently generating about 0.05 per unit of volatility. If you would invest 451.00 in Next Biometrics Group on August 24, 2024 and sell it today you would earn a total of 241.00 from holding Next Biometrics Group or generate 53.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
XXL ASA vs. Next Biometrics Group
Performance |
| Timeline |
| XXL ASA |
| Next Biometrics Group |
XXL ASA and Next Biometrics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XXL ASA and Next Biometrics
The main advantage of trading using opposite XXL ASA and Next Biometrics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XXL ASA position performs unexpectedly, Next Biometrics 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 Next Biometrics will offset losses from the drop in Next Biometrics' long position.The idea behind XXL ASA and Next Biometrics Group 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.| Next Biometrics vs. Idex ASA | Next Biometrics vs. XXL ASA | Next Biometrics vs. Bergenbio ASA | Next Biometrics vs. Precise Biometrics AB |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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