Correlation Between Nextplat Corp and Iris Energy

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

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

Diversification Opportunities for Nextplat Corp and Iris Energy

-0.48

Correlation Coefficient

Nextplat Corp  Iris Energy

Very good diversification

The 3 months correlation between Nextplat and Iris is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Nextplat Corp and Iris Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iris Energy and Nextplat Corp 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 Nextplat Corp are associated (or correlated) with Iris Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iris Energy has no effect on the direction of Nextplat Corp i.e., Nextplat Corp and Iris Energy go up and down completely randomly.

Pair Corralation between Nextplat Corp and Iris Energy

Given the investment horizon of 90 days Nextplat Corp is expected to generate 20.73 times less return on investment than Iris Energy. But when comparing it to its historical volatility, Nextplat Corp is 1.56 times less risky than Iris Energy. It trades about 0.01 of its potential returns per unit of risk. Iris Energy is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  157.00  in Iris Energy on August 22, 2024 and sell it today you would earn a total of  884.00  from holding Iris Energy or generate 563.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Nextplat Corp  vs.  Iris Energy

Nextplat Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextplat Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Iris Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iris Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Iris Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextplat Corp and Iris Energy

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

The idea behind Nextplat Corp and Iris Energy 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.