Correlation Between NEXON and Aristocrat Leisure
Can any of the company-specific risk be diversified away by investing in both NEXON and Aristocrat Leisure 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 and Aristocrat Leisure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEXON Co and Aristocrat Leisure Limited, you can compare the effects of market volatilities on NEXON and Aristocrat Leisure 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 with a short position of Aristocrat Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEXON and Aristocrat Leisure.
Diversification Opportunities for NEXON and Aristocrat Leisure
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NEXON and Aristocrat is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding NEXON Co and Aristocrat Leisure Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and NEXON 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 Aristocrat Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristocrat Leisure has no effect on the direction of NEXON i.e., NEXON and Aristocrat Leisure go up and down completely randomly.
Pair Corralation between NEXON and Aristocrat Leisure
Assuming the 90 days trading horizon NEXON Co is expected to generate 7.45 times more return on investment than Aristocrat Leisure. However, NEXON is 7.45 times more volatile than Aristocrat Leisure Limited. It trades about 0.06 of its potential returns per unit of risk. Aristocrat Leisure Limited is currently generating about 0.22 per unit of risk. If you would invest 854.00 in NEXON Co on November 4, 2024 and sell it today you would earn a total of 396.00 from holding NEXON Co or generate 46.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NEXON Co vs. Aristocrat Leisure Limited
Performance |
| Timeline |
| NEXON |
| Aristocrat Leisure |
NEXON and Aristocrat Leisure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NEXON and Aristocrat Leisure
The main advantage of trading using opposite NEXON and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEXON position performs unexpectedly, Aristocrat Leisure 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 Aristocrat Leisure will offset losses from the drop in Aristocrat Leisure's long position.The idea behind NEXON Co and Aristocrat Leisure Limited 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.| Aristocrat Leisure vs. Live Nation Entertainment | Aristocrat Leisure vs. CNVISION MEDIA | Aristocrat Leisure vs. Merit Medical Systems | Aristocrat Leisure vs. GigaMedia |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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