Correlation Between NEXON and Bilibili

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

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

Diversification Opportunities for NEXON and Bilibili

0.69

Correlation Coefficient

NEXON  Bilibili

Poor diversification

The 3 months correlation between NEXON and Bilibili is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding NEXON Co and Bilibili in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bilibili and NEXON 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 NEXON Co are associated (or correlated) with Bilibili. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bilibili has no effect on the direction of NEXON i.e., NEXON and Bilibili go up and down completely randomly.

Pair Corralation between NEXON and Bilibili

Assuming the 90 days horizon NEXON Co is expected to generate 0.81 times more return on investment than Bilibili. However, NEXON Co is 1.23 times less risky than Bilibili. It trades about -0.1 of its potential returns per unit of risk. Bilibili is currently generating about -0.08 per unit of risk. If you would invest  1,750  in NEXON Co on October 8, 2024 and sell it today you would lose (340.00) from holding NEXON Co or give up 19.43% of portfolio value over 90 days.

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

NEXON Co  vs.  Bilibili

NEXON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEXON Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Bilibili

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bilibili has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NEXON and Bilibili

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

The idea behind NEXON Co and Bilibili 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.