Correlation Between Nextplay Technologies and Microsoft

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

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

Diversification Opportunities for Nextplay Technologies and Microsoft

-0.47

Correlation Coefficient

Nextplay Technologies  Microsoft

Very good diversification

The 3 months correlation between Nextplay and Microsoft is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Nextplay Technologies and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Nextplay Technologies 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 Nextplay Technologies are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Nextplay Technologies i.e., Nextplay Technologies and Microsoft go up and down completely randomly.

Pair Corralation between Nextplay Technologies and Microsoft

Given the investment horizon of 90 days Nextplay Technologies is expected to generate 167.22 times more return on investment than Microsoft. However, Nextplay Technologies is 167.22 times more volatile than Microsoft. It trades about 0.18 of its potential returns per unit of risk. Microsoft is currently generating about -0.13 per unit of risk. If you would invest  66.00  in Nextplay Technologies on January 25, 2024 and sell it today you would lose (26.00) from holding Nextplay Technologies or give up 39.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	81.82%
Values	Daily Returns

Nextplay Technologies  vs.  Microsoft

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.

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Nextplay Technologies and Microsoft

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

The idea behind Nextplay Technologies and Microsoft 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.