Correlation Between NICE Total and Daejung Chemicals

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

By analyzing existing cross correlation between NICE Total Cash and Daejung Chemicals Metals, you can compare the effects of market volatilities on NICE Total and Daejung Chemicals 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 Total with a short position of Daejung Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of NICE Total and Daejung Chemicals.

Diversification Opportunities for NICE Total and Daejung Chemicals

0.07

Correlation Coefficient

NICE Total  Daejung Chemicals

Significant diversification

The 3 months correlation between NICE and Daejung is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NICE Total Cash and Daejung Chemicals Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daejung Chemicals Metals and NICE Total 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 Total Cash are associated (or correlated) with Daejung Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daejung Chemicals Metals has no effect on the direction of NICE Total i.e., NICE Total and Daejung Chemicals go up and down completely randomly.

Pair Corralation between NICE Total and Daejung Chemicals

Assuming the 90 days trading horizon NICE Total Cash is expected to generate 0.85 times more return on investment than Daejung Chemicals. However, NICE Total Cash is 1.18 times less risky than Daejung Chemicals. It trades about 0.01 of its potential returns per unit of risk. Daejung Chemicals Metals is currently generating about -0.21 per unit of risk. If you would invest  479,000  in NICE Total Cash on September 3, 2024 and sell it today you would earn a total of  0.00  from holding NICE Total Cash or generate 0.0% return on investment over 90 days.

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

NICE Total Cash  vs.  Daejung Chemicals Metals

NICE Total Cash

Risk-Adjusted Performance

0 of 100

Very Weak

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

Daejung Chemicals Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daejung Chemicals Metals 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with NICE Total and Daejung Chemicals

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

The idea behind NICE Total Cash and Daejung Chemicals Metals 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.