Correlation Between Shift4 Payments and Nextplay Technologies

Can any of the company-specific risk be diversified away by investing in both Shift4 Payments and Nextplay Technologies 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 Shift4 Payments and Nextplay Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shift4 Payments and Nextplay Technologies, you can compare the effects of market volatilities on Shift4 Payments and Nextplay Technologies 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 Shift4 Payments with a short position of Nextplay Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shift4 Payments and Nextplay Technologies.

Diversification Opportunities for Shift4 Payments and Nextplay Technologies

0.72

Correlation Coefficient

Shift4 Payments  Nextplay Technologies

Poor diversification

The 3 months correlation between Shift4 and Nextplay is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Shift4 Payments and Nextplay Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextplay Technologies and Shift4 Payments 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 Shift4 Payments are associated (or correlated) with Nextplay Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextplay Technologies has no effect on the direction of Shift4 Payments i.e., Shift4 Payments and Nextplay Technologies go up and down completely randomly.

Pair Corralation between Shift4 Payments and Nextplay Technologies

Given the investment horizon of 90 days Shift4 Payments is expected to under-perform the Nextplay Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Shift4 Payments is 74.2 times less risky than Nextplay Technologies. The stock trades about -0.19 of its potential returns per unit of risk. The Nextplay Technologies is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  64.00  in Nextplay Technologies on January 26, 2024 and sell it today you would lose (24.00) from holding Nextplay Technologies or give up 37.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	80.95%
Values	Daily Returns

Shift4 Payments  vs.  Nextplay Technologies

Shift4 Payments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shift4 Payments has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Nextplay Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nextplay Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Nextplay Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shift4 Payments and Nextplay Technologies

The main advantage of trading using opposite Shift4 Payments and Nextplay Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shift4 Payments position performs unexpectedly, Nextplay Technologies 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 Nextplay Technologies will offset losses from the drop in Nextplay Technologies' long position.

The idea behind Shift4 Payments and Nextplay Technologies 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.