Correlation Between NEXCOM International and Shiny Chemical

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

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

Diversification Opportunities for NEXCOM International and Shiny Chemical

-0.64

Correlation Coefficient

NEXCOM International  Shiny Chemical

Excellent diversification

The 3 months correlation between NEXCOM and Shiny is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding NEXCOM International Co and Shiny Chemical Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shiny Chemical Industrial and NEXCOM International 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 NEXCOM International Co are associated (or correlated) with Shiny Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shiny Chemical Industrial has no effect on the direction of NEXCOM International i.e., NEXCOM International and Shiny Chemical go up and down completely randomly.

Pair Corralation between NEXCOM International and Shiny Chemical

Assuming the 90 days trading horizon NEXCOM International Co is expected to generate 2.07 times more return on investment than Shiny Chemical. However, NEXCOM International is 2.07 times more volatile than Shiny Chemical Industrial. It trades about 0.18 of its potential returns per unit of risk. Shiny Chemical Industrial is currently generating about -0.14 per unit of risk. If you would invest  5,080  in NEXCOM International Co on October 10, 2024 and sell it today you would earn a total of  1,150  from holding NEXCOM International Co or generate 22.64% return on investment over 90 days.

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

NEXCOM International Co  vs.  Shiny Chemical Industrial

NEXCOM International

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NEXCOM International Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, NEXCOM International showed solid returns over the last few months and may actually be approaching a breakup point.

Shiny Chemical Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shiny Chemical Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with NEXCOM International and Shiny Chemical

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

The idea behind NEXCOM International Co and Shiny Chemical Industrial 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .