Correlation Between NICE Information and Hanjoo Light

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

Diversification Opportunities for NICE Information and Hanjoo Light

-0.78

Correlation Coefficient

NICE Information  Hanjoo Light

Pay attention - limited upside

The 3 months correlation between NICE and Hanjoo is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding NICE Information Service and Hanjoo Light Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanjoo Light Metal 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 Hanjoo Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanjoo Light Metal has no effect on the direction of NICE Information i.e., NICE Information and Hanjoo Light go up and down completely randomly.

Pair Corralation between NICE Information and Hanjoo Light

Assuming the 90 days trading horizon NICE Information is expected to generate 1.72 times less return on investment than Hanjoo Light. But when comparing it to its historical volatility, NICE Information Service is 1.34 times less risky than Hanjoo Light. It trades about 0.16 of its potential returns per unit of risk. Hanjoo Light Metal is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  70,800  in Hanjoo Light Metal on October 9, 2024 and sell it today you would earn a total of  6,700  from holding Hanjoo Light Metal or generate 9.46% return on investment over 90 days.

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

NICE Information Service  vs.  Hanjoo Light Metal

NICE Information Service

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NICE Information Service are ranked lower than 7 (%) 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 February 2025.

Hanjoo Light Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanjoo Light Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with NICE Information and Hanjoo Light

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

The idea behind NICE Information Service and Hanjoo Light Metal 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.