Correlation Between Nexam Chemical and Episurf Medical

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

By analyzing existing cross correlation between Nexam Chemical Holding and Episurf Medical AB, you can compare the effects of market volatilities on Nexam Chemical and Episurf Medical 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 Nexam Chemical with a short position of Episurf Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexam Chemical and Episurf Medical.

Diversification Opportunities for Nexam Chemical and Episurf Medical

0.09

Correlation Coefficient

Nexam Chemical  Episurf Medical

Significant diversification

The 3 months correlation between Nexam and Episurf is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Nexam Chemical Holding and Episurf Medical AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Episurf Medical AB and Nexam Chemical 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 Nexam Chemical Holding are associated (or correlated) with Episurf Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Episurf Medical AB has no effect on the direction of Nexam Chemical i.e., Nexam Chemical and Episurf Medical go up and down completely randomly.

Pair Corralation between Nexam Chemical and Episurf Medical

Assuming the 90 days trading horizon Nexam Chemical is expected to generate 3.13 times less return on investment than Episurf Medical. But when comparing it to its historical volatility, Nexam Chemical Holding is 1.99 times less risky than Episurf Medical. It trades about 0.06 of its potential returns per unit of risk. Episurf Medical AB is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Episurf Medical AB on October 26, 2024 and sell it today you would earn a total of  1.00  from holding Episurf Medical AB or generate 9.09% return on investment over 90 days.

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

Nexam Chemical Holding  vs.  Episurf Medical AB

Nexam Chemical Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nexam Chemical Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nexam Chemical is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Episurf Medical AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Episurf Medical AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Nexam Chemical and Episurf Medical

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

The idea behind Nexam Chemical Holding and Episurf Medical AB 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.