Correlation Between NICE Information and ECSTELECOM

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

Diversification Opportunities for NICE Information and ECSTELECOM

0.28

Correlation Coefficient

NICE Information  ECSTELECOM

Modest diversification

The 3 months correlation between NICE and ECSTELECOM is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding NICE Information Service and ECSTELECOM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECSTELECOM 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 ECSTELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECSTELECOM has no effect on the direction of NICE Information i.e., NICE Information and ECSTELECOM go up and down completely randomly.

Pair Corralation between NICE Information and ECSTELECOM

Assuming the 90 days trading horizon NICE Information is expected to generate 1.41 times less return on investment than ECSTELECOM. In addition to that, NICE Information is 1.16 times more volatile than ECSTELECOM Co. It trades about 0.11 of its total potential returns per unit of risk. ECSTELECOM Co is currently generating about 0.18 per unit of volatility. If you would invest  291,500  in ECSTELECOM Co on September 28, 2024 and sell it today you would earn a total of  18,500  from holding ECSTELECOM Co or generate 6.35% 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.  ECSTELECOM Co

NICE Information Service

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NICE Information Service are ranked lower than 12 (%) 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.

ECSTELECOM

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ECSTELECOM Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ECSTELECOM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NICE Information and ECSTELECOM

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

The idea behind NICE Information Service and ECSTELECOM Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.