Correlation Between NEXON Co and GAMING FAC
Can any of the company-specific risk be diversified away by investing in both NEXON Co and GAMING FAC 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 NEXON Co and GAMING FAC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEXON Co and GAMING FAC SA, you can compare the effects of market volatilities on NEXON Co and GAMING FAC 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 NEXON Co with a short position of GAMING FAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEXON Co and GAMING FAC.
Diversification Opportunities for NEXON Co and GAMING FAC
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NEXON and GAMING is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding NEXON Co and GAMING FAC SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMING FAC SA and NEXON Co 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 NEXON Co are associated (or correlated) with GAMING FAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMING FAC SA has no effect on the direction of NEXON Co i.e., NEXON Co and GAMING FAC go up and down completely randomly.
Pair Corralation between NEXON Co and GAMING FAC
Assuming the 90 days horizon NEXON Co is expected to under-perform the GAMING FAC. But the stock apears to be less risky and, when comparing its historical volatility, NEXON Co is 1.18 times less risky than GAMING FAC. The stock trades about -0.17 of its potential returns per unit of risk. The GAMING FAC SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 165.00 in GAMING FAC SA on August 27, 2024 and sell it today you would earn a total of 9.00 from holding GAMING FAC SA or generate 5.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NEXON Co vs. GAMING FAC SA
Performance |
| Timeline |
| NEXON Co |
| GAMING FAC SA |
NEXON Co and GAMING FAC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NEXON Co and GAMING FAC
The main advantage of trading using opposite NEXON Co and GAMING FAC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEXON Co position performs unexpectedly, GAMING FAC 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 GAMING FAC will offset losses from the drop in GAMING FAC's long position.The idea behind NEXON Co and GAMING FAC SA 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.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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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