Correlation Between Nexon Co and Gravity

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

By analyzing existing cross correlation between Nexon Co Ltd and Gravity Co, you can compare the effects of market volatilities on Nexon Co and Gravity 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 Gravity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexon Co and Gravity.

Diversification Opportunities for Nexon Co and Gravity

0.2

Correlation Coefficient

Nexon Co  Gravity

Modest diversification

The 3 months correlation between Nexon and Gravity is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Nexon Co Ltd and Gravity Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gravity 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 Ltd are associated (or correlated) with Gravity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gravity has no effect on the direction of Nexon Co i.e., Nexon Co and Gravity go up and down completely randomly.

Pair Corralation between Nexon Co and Gravity

Assuming the 90 days horizon Nexon Co Ltd is expected to under-perform the Gravity. In addition to that, Nexon Co is 1.5 times more volatile than Gravity Co. It trades about -0.04 of its total potential returns per unit of risk. Gravity Co is currently generating about -0.02 per unit of volatility. If you would invest  6,320  in Gravity Co on December 29, 2024 and sell it today you would lose (179.00) from holding Gravity Co or give up 2.83% of portfolio value over 90 days.

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

Nexon Co Ltd  vs.  Gravity Co

Nexon Co

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nexon Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Gravity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gravity Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gravity is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nexon Co and Gravity

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

The idea behind Nexon Co Ltd and Gravity 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.