Correlation Between Nacon Sa and DONTNOD Entertainment

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

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

Diversification Opportunities for Nacon Sa and DONTNOD Entertainment

0.94

Correlation Coefficient

Nacon Sa  DONTNOD Entertainment

Almost no diversification

The 3 months correlation between Nacon and DONTNOD is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Nacon Sa and DONTNOD Entertainment SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DONTNOD Entertainment and Nacon Sa 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 Nacon Sa are associated (or correlated) with DONTNOD Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DONTNOD Entertainment has no effect on the direction of Nacon Sa i.e., Nacon Sa and DONTNOD Entertainment go up and down completely randomly.

Pair Corralation between Nacon Sa and DONTNOD Entertainment

Assuming the 90 days trading horizon Nacon Sa is expected to under-perform the DONTNOD Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Nacon Sa is 1.41 times less risky than DONTNOD Entertainment. The stock trades about -0.36 of its potential returns per unit of risk. The DONTNOD Entertainment SA is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  186.00  in DONTNOD Entertainment SA on September 4, 2024 and sell it today you would lose (80.00) from holding DONTNOD Entertainment SA or give up 43.01% of portfolio value over 90 days.

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

Nacon Sa  vs.  DONTNOD Entertainment SA

Nacon Sa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nacon Sa has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

DONTNOD Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DONTNOD Entertainment SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Nacon Sa and DONTNOD Entertainment

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

The idea behind Nacon Sa and DONTNOD 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.