Correlation Between CD Projekt and NEXON Co

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

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

Diversification Opportunities for CD Projekt and NEXON Co

0.45

Correlation Coefficient

CD Projekt  NEXON Co

Very weak diversification

The 3 months correlation between OTGLY and NEXON is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding CD Projekt SA and NEXON Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXON Co and CD Projekt 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 CD Projekt SA are associated (or correlated) with NEXON Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXON Co has no effect on the direction of CD Projekt i.e., CD Projekt and NEXON Co go up and down completely randomly.

Pair Corralation between CD Projekt and NEXON Co

Assuming the 90 days horizon CD Projekt SA is expected to generate 1.13 times more return on investment than NEXON Co. However, CD Projekt is 1.13 times more volatile than NEXON Co. It trades about -0.06 of its potential returns per unit of risk. NEXON Co is currently generating about -0.11 per unit of risk. If you would invest  1,121  in CD Projekt SA on September 3, 2024 and sell it today you would lose (102.00) from holding CD Projekt SA or give up 9.1% of portfolio value over 90 days.

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

CD Projekt SA  vs.  NEXON Co

CD Projekt SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

NEXON Co

Risk-Adjusted Performance

0 of 100

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CD Projekt and NEXON Co

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

The idea behind CD Projekt SA and NEXON 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.