Correlation Between Nacon Sa and Icape Holding

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

By analyzing existing cross correlation between Nacon Sa and Icape Holding, you can compare the effects of market volatilities on Nacon Sa and Icape Holding 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 Icape Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nacon Sa and Icape Holding.

Diversification Opportunities for Nacon Sa and Icape Holding

0.87

Correlation Coefficient

Nacon Sa  Icape Holding

Very poor diversification

The 3 months correlation between Nacon and Icape is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nacon Sa and Icape Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icape Holding 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 Icape Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icape Holding has no effect on the direction of Nacon Sa i.e., Nacon Sa and Icape Holding go up and down completely randomly.

Pair Corralation between Nacon Sa and Icape Holding

Assuming the 90 days trading horizon Nacon Sa is expected to under-perform the Icape Holding. In addition to that, Nacon Sa is 1.27 times more volatile than Icape Holding. It trades about -0.02 of its total potential returns per unit of risk. Icape Holding is currently generating about 0.03 per unit of volatility. If you would invest  914.00  in Icape Holding on October 7, 2024 and sell it today you would earn a total of  24.00  from holding Icape Holding or generate 2.63% return on investment over 90 days.

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

Nacon Sa  vs.  Icape Holding

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 relatively invariable basic indicators, Nacon Sa is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Icape Holding

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Icape Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Icape Holding may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nacon Sa and Icape Holding

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

The idea behind Nacon Sa and Icape Holding 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.