Correlation Between NEXON and STORE ELECTRONIC

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

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

Diversification Opportunities for NEXON and STORE ELECTRONIC

0.73

Correlation Coefficient

NEXON  STORE ELECTRONIC

Poor diversification

The 3 months correlation between NEXON and STORE is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding NEXON Co and STORE ELECTRONIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STORE ELECTRONIC 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 STORE ELECTRONIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STORE ELECTRONIC has no effect on the direction of NEXON i.e., NEXON and STORE ELECTRONIC go up and down completely randomly.

Pair Corralation between NEXON and STORE ELECTRONIC

Assuming the 90 days trading horizon NEXON Co is expected to under-perform the STORE ELECTRONIC. In addition to that, NEXON is 1.3 times more volatile than STORE ELECTRONIC. It trades about -0.11 of its total potential returns per unit of risk. STORE ELECTRONIC is currently generating about -0.07 per unit of volatility. If you would invest  14,810  in STORE ELECTRONIC on September 16, 2024 and sell it today you would lose (1,460) from holding STORE ELECTRONIC or give up 9.86% 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.  STORE ELECTRONIC

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.

STORE ELECTRONIC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STORE ELECTRONIC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with NEXON and STORE ELECTRONIC

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

The idea behind NEXON Co and STORE ELECTRONIC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.