Correlation Between System and NICE Information

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

By analyzing existing cross correlation between System and Application and NICE Information Service, you can compare the effects of market volatilities on System and NICE Information 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 System with a short position of NICE Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of System and NICE Information.

Diversification Opportunities for System and NICE Information

0.3

Correlation Coefficient

System  NICE Information

Weak diversification

The 3 months correlation between System and NICE is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding System and Application and NICE Information Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NICE Information Service and System 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 System and Application are associated (or correlated) with NICE Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NICE Information Service has no effect on the direction of System i.e., System and NICE Information go up and down completely randomly.

Pair Corralation between System and NICE Information

Assuming the 90 days trading horizon System and Application is expected to generate 2.03 times more return on investment than NICE Information. However, System is 2.03 times more volatile than NICE Information Service. It trades about 0.08 of its potential returns per unit of risk. NICE Information Service is currently generating about 0.07 per unit of risk. If you would invest  134,443  in System and Application on December 1, 2024 and sell it today you would earn a total of  19,557  from holding System and Application or generate 14.55% return on investment over 90 days.

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

System and Application  vs.  NICE Information Service

System and Application

Risk-Adjusted Performance

Modest

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

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 5 (%) 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.

Pair Trading with System and NICE Information

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

The idea behind System and Application and NICE Information Service 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.