Correlation Between NICE Information and Oriental Precision
Can any of the company-specific risk be diversified away by investing in both NICE Information and Oriental Precision 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 NICE Information and Oriental Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NICE Information Service and Oriental Precision Engineering, you can compare the effects of market volatilities on NICE Information and Oriental Precision 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 NICE Information with a short position of Oriental Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of NICE Information and Oriental Precision.
Diversification Opportunities for NICE Information and Oriental Precision
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NICE and Oriental is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding NICE Information Service and Oriental Precision Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Precision and NICE Information 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 NICE Information Service are associated (or correlated) with Oriental Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Precision has no effect on the direction of NICE Information i.e., NICE Information and Oriental Precision go up and down completely randomly.
Pair Corralation between NICE Information and Oriental Precision
Assuming the 90 days trading horizon NICE Information is expected to generate 6.39 times less return on investment than Oriental Precision. But when comparing it to its historical volatility, NICE Information Service is 1.77 times less risky than Oriental Precision. It trades about 0.07 of its potential returns per unit of risk. Oriental Precision Engineering is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 483,028 in Oriental Precision Engineering on October 12, 2024 and sell it today you would earn a total of 68,972 from holding Oriental Precision Engineering or generate 14.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
NICE Information Service vs. Oriental Precision Engineering
Performance |
| Timeline |
| NICE Information Service |
| Oriental Precision |
NICE Information and Oriental Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NICE Information and Oriental Precision
The main advantage of trading using opposite NICE Information and Oriental Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NICE Information position performs unexpectedly, Oriental Precision 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 Oriental Precision will offset losses from the drop in Oriental Precision's long position.| NICE Information vs. Shinsegae Engineering Construction | NICE Information vs. KT Submarine Telecom | NICE Information vs. Dongbang Ship Machinery | NICE Information vs. Seoul Electronics Telecom |
| Oriental Precision vs. Lotte Rental Co | Oriental Precision vs. Asia Technology Co | Oriental Precision vs. Display Tech Co | Oriental Precision vs. Dong A Steel Technology |
Check out your portfolio center.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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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