Correlation Between Netcapital and Netcapital

Can any of the company-specific risk be diversified away by investing in both Netcapital and Netcapital 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 Netcapital and Netcapital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Netcapital and Netcapital, you can compare the effects of market volatilities on Netcapital and Netcapital 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 Netcapital with a short position of Netcapital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netcapital and Netcapital.

Diversification Opportunities for Netcapital and Netcapital

0.56

Correlation Coefficient

Netcapital  Netcapital

Very weak diversification

The 3 months correlation between Netcapital and Netcapital is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Netcapital and Netcapital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcapital and Netcapital 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 Netcapital are associated (or correlated) with Netcapital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcapital has no effect on the direction of Netcapital i.e., Netcapital and Netcapital go up and down completely randomly.

Pair Corralation between Netcapital and Netcapital

Assuming the 90 days horizon Netcapital is expected to generate 2.57 times more return on investment than Netcapital. However, Netcapital is 2.57 times more volatile than Netcapital. It trades about 0.14 of its potential returns per unit of risk. Netcapital is currently generating about 0.13 per unit of risk. If you would invest  2.59  in Netcapital on May 7, 2025 and sell it today you would earn a total of  0.91  from holding Netcapital or generate 35.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	87.1%
Values	Daily Returns

Netcapital  vs.  Netcapital

Netcapital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Netcapital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, Netcapital showed solid returns over the last few months and may actually be approaching a breakup point.

Netcapital

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Netcapital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Netcapital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netcapital and Netcapital

The main advantage of trading using opposite Netcapital and Netcapital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netcapital position performs unexpectedly, Netcapital 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 Netcapital will offset losses from the drop in Netcapital's long position.

The idea behind Netcapital and Netcapital 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.

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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.