Correlation Between Nextracker and Emeren

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

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

Diversification Opportunities for Nextracker and Emeren

-0.41

Correlation Coefficient

Nextracker  Emeren

Very good diversification

The 3 months correlation between Nextracker and Emeren is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Nextracker Class A and Emeren Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emeren Group and Nextracker 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 Nextracker Class A are associated (or correlated) with Emeren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emeren Group has no effect on the direction of Nextracker i.e., Nextracker and Emeren go up and down completely randomly.

Pair Corralation between Nextracker and Emeren

Considering the 90-day investment horizon Nextracker Class A is expected to generate 1.32 times more return on investment than Emeren. However, Nextracker is 1.32 times more volatile than Emeren Group. It trades about 0.19 of its potential returns per unit of risk. Emeren Group is currently generating about -0.2 per unit of risk. If you would invest  3,256  in Nextracker Class A on August 28, 2024 and sell it today you would earn a total of  784.00  from holding Nextracker Class A or generate 24.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Nextracker Class A  vs.  Emeren Group

Nextracker Class A

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nextracker Class A are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Nextracker is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Emeren Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Emeren Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Emeren may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Nextracker and Emeren

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

The idea behind Nextracker Class A and Emeren 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.