Correlation Between NICE Information and INSUN Environmental

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

Diversification Opportunities for NICE Information and INSUN Environmental

-0.54

Correlation Coefficient

NICE Information  INSUN Environmental

Excellent diversification

The 3 months correlation between NICE and INSUN is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding NICE Information Service and INSUN Environmental New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSUN Environmental New 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 INSUN Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSUN Environmental New has no effect on the direction of NICE Information i.e., NICE Information and INSUN Environmental go up and down completely randomly.

Pair Corralation between NICE Information and INSUN Environmental

Assuming the 90 days trading horizon NICE Information is expected to generate 1.23 times less return on investment than INSUN Environmental. But when comparing it to its historical volatility, NICE Information Service is 2.0 times less risky than INSUN Environmental. It trades about 0.18 of its potential returns per unit of risk. INSUN Environmental New is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  497,500  in INSUN Environmental New on September 22, 2024 and sell it today you would earn a total of  38,500  from holding INSUN Environmental New or generate 7.74% return on investment over 90 days.

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

NICE Information Service  vs.  INSUN Environmental New

NICE Information Service

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NICE Information Service are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NICE Information sustained solid returns over the last few months and may actually be approaching a breakup point.

INSUN Environmental New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INSUN Environmental New has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with NICE Information and INSUN Environmental

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

The idea behind NICE Information Service and INSUN Environmental New 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.