Correlation Between NEXON and Sea

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

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

Diversification Opportunities for NEXON and Sea

-0.9

Correlation Coefficient

NEXON  Sea

Pay attention - limited upside

The 3 months correlation between NEXON and Sea is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding NEXON Co and Sea Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Limited 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Limited has no effect on the direction of NEXON i.e., NEXON and Sea go up and down completely randomly.

Pair Corralation between NEXON and Sea

Assuming the 90 days trading horizon NEXON Co is expected to generate 0.84 times more return on investment than Sea. However, NEXON Co is 1.19 times less risky than Sea. It trades about 0.25 of its potential returns per unit of risk. Sea Limited is currently generating about -0.1 per unit of risk. If you would invest  1,290  in NEXON Co on September 27, 2024 and sell it today you would earn a total of  90.00  from holding NEXON Co or generate 6.98% return on investment over 90 days.

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

NEXON Co  vs.  Sea Limited

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. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sea Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sea reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEXON and Sea

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

The idea behind NEXON Co and Sea Limited 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.