Correlation Between NICE Information and PI Advanced

Can any of the company-specific risk be diversified away by investing in both NICE Information and PI Advanced 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 PI Advanced 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 PI Advanced Materials, you can compare the effects of market volatilities on NICE Information and PI Advanced 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 PI Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of NICE Information and PI Advanced.

Diversification Opportunities for NICE Information and PI Advanced

0.26

Correlation Coefficient

NICE Information  PI Advanced

Modest diversification

The 3 months correlation between NICE and 178920 is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NICE Information Service and PI Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PI Advanced Materials 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 PI Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PI Advanced Materials has no effect on the direction of NICE Information i.e., NICE Information and PI Advanced go up and down completely randomly.

Pair Corralation between NICE Information and PI Advanced

Assuming the 90 days trading horizon NICE Information is expected to generate 2.85 times less return on investment than PI Advanced. But when comparing it to its historical volatility, NICE Information Service is 1.94 times less risky than PI Advanced. It trades about 0.06 of its potential returns per unit of risk. PI Advanced Materials is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,574,000  in PI Advanced Materials on December 4, 2024 and sell it today you would earn a total of  248,000  from holding PI Advanced Materials or generate 15.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NICE Information Service  vs.  PI Advanced Materials

NICE Information Service

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NICE Information Service are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NICE Information may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PI Advanced Materials

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PI Advanced Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PI Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NICE Information and PI Advanced

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

The idea behind NICE Information Service and PI Advanced Materials 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.