Correlation Between NEXON Co and CD Projekt

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

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

Diversification Opportunities for NEXON Co and CD Projekt

-0.55

Correlation Coefficient

NEXON Co  CD Projekt

Excellent diversification

The 3 months correlation between NEXON and OTGLY is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding NEXON Co and CD Projekt SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CD Projekt SA and NEXON Co 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 NEXON Co are associated (or correlated) with CD Projekt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CD Projekt SA has no effect on the direction of NEXON Co i.e., NEXON Co and CD Projekt go up and down completely randomly.

Pair Corralation between NEXON Co and CD Projekt

Assuming the 90 days horizon NEXON Co is expected to under-perform the CD Projekt. In addition to that, NEXON Co is 1.25 times more volatile than CD Projekt SA. It trades about -0.1 of its total potential returns per unit of risk. CD Projekt SA is currently generating about 0.11 per unit of volatility. If you would invest  1,162  in CD Projekt SA on December 28, 2024 and sell it today you would earn a total of  195.00  from holding CD Projekt SA or generate 16.78% return on investment over 90 days.

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

NEXON Co  vs.  CD Projekt SA

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CD Projekt SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CD Projekt SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, CD Projekt showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEXON Co and CD Projekt

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

The idea behind NEXON Co and CD Projekt 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.