Correlation Between NEXON Co and Ubisoft Entertainment

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

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

Diversification Opportunities for NEXON Co and Ubisoft Entertainment

0.51

Correlation Coefficient

NEXON Co  Ubisoft Entertainment

Very weak diversification

The 3 months correlation between NEXON and Ubisoft is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding NEXON Co and Ubisoft Entertainment SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubisoft Entertainment and NEXON Co 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 Ubisoft Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubisoft Entertainment has no effect on the direction of NEXON Co i.e., NEXON Co and Ubisoft Entertainment go up and down completely randomly.

Pair Corralation between NEXON Co and Ubisoft Entertainment

Assuming the 90 days trading horizon NEXON Co is expected to under-perform the Ubisoft Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, NEXON Co is 1.44 times less risky than Ubisoft Entertainment. The stock trades about -0.01 of its potential returns per unit of risk. The Ubisoft Entertainment SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,178  in Ubisoft Entertainment SA on December 2, 2024 and sell it today you would earn a total of  42.00  from holding Ubisoft Entertainment SA or generate 3.57% return on investment over 90 days.

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

NEXON Co  vs.  Ubisoft Entertainment SA

NEXON Co

Risk-Adjusted Performance

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 comparatively stable basic indicators, NEXON Co is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Ubisoft Entertainment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ubisoft Entertainment SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Ubisoft Entertainment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NEXON Co and Ubisoft Entertainment

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

The idea behind NEXON Co and Ubisoft Entertainment SA 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.