Correlation Between ICD and Next Entertainment

Can any of the company-specific risk be diversified away by investing in both ICD and Next Entertainment 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 ICD and Next Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ICD Co and Next Entertainment World, you can compare the effects of market volatilities on ICD and Next Entertainment 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 ICD with a short position of Next Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICD and Next Entertainment.

Diversification Opportunities for ICD and Next Entertainment

0.05

Correlation Coefficient

ICD  Next Entertainment

Significant diversification

The 3 months correlation between ICD and Next is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding ICD Co and Next Entertainment World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Entertainment World and ICD 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 ICD Co are associated (or correlated) with Next Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Entertainment World has no effect on the direction of ICD i.e., ICD and Next Entertainment go up and down completely randomly.

Pair Corralation between ICD and Next Entertainment

Assuming the 90 days trading horizon ICD Co is expected to generate 1.87 times more return on investment than Next Entertainment. However, ICD is 1.87 times more volatile than Next Entertainment World. It trades about 0.04 of its potential returns per unit of risk. Next Entertainment World is currently generating about -0.03 per unit of risk. If you would invest  426,500  in ICD Co on December 30, 2024 and sell it today you would earn a total of  17,500  from holding ICD Co or generate 4.1% return on investment over 90 days.

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

ICD Co  vs.  Next Entertainment World

ICD Co

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ICD Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ICD sustained solid returns over the last few months and may actually be approaching a breakup point.

Next Entertainment World

Risk-Adjusted Performance

Very Weak

Over the last 90 days Next Entertainment World has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Next Entertainment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ICD and Next Entertainment

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

The idea behind ICD Co and Next Entertainment World 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.