Correlation Between GungHo Online and NEXON Co

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

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

Diversification Opportunities for GungHo Online and NEXON Co

0.02

Correlation Coefficient

GungHo Online  NEXON Co

Significant diversification

The 3 months correlation between GungHo and NEXON is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding GungHo Online Entertainment and NEXON Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXON Co and GungHo Online 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 GungHo Online Entertainment are associated (or correlated) with NEXON Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXON Co has no effect on the direction of GungHo Online i.e., GungHo Online and NEXON Co go up and down completely randomly.

Pair Corralation between GungHo Online and NEXON Co

Assuming the 90 days horizon GungHo Online Entertainment is expected to under-perform the NEXON Co. In addition to that, GungHo Online is 1.12 times more volatile than NEXON Co. It trades about -0.02 of its total potential returns per unit of risk. NEXON Co is currently generating about 0.08 per unit of volatility. If you would invest  1,220  in NEXON Co on December 5, 2024 and sell it today you would earn a total of  50.00  from holding NEXON Co or generate 4.1% return on investment over 90 days.

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

GungHo Online Entertainment  vs.  NEXON Co

GungHo Online Entert

Risk-Adjusted Performance

Weak

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

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GungHo Online and NEXON Co

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

The idea behind GungHo Online Entertainment and NEXON Co 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.

Check out your portfolio center.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.