Correlation Between NICE Total and Geumhwa Plant

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

By analyzing existing cross correlation between NICE Total Cash and Geumhwa Plant Service, you can compare the effects of market volatilities on NICE Total and Geumhwa Plant 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 NICE Total with a short position of Geumhwa Plant. Check out your portfolio center. Please also check ongoing floating volatility patterns of NICE Total and Geumhwa Plant.

Diversification Opportunities for NICE Total and Geumhwa Plant

0.18

Correlation Coefficient

NICE Total  Geumhwa Plant

Average diversification

The 3 months correlation between NICE and Geumhwa is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding NICE Total Cash and Geumhwa Plant Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geumhwa Plant Service and NICE Total 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 NICE Total Cash are associated (or correlated) with Geumhwa Plant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geumhwa Plant Service has no effect on the direction of NICE Total i.e., NICE Total and Geumhwa Plant go up and down completely randomly.

Pair Corralation between NICE Total and Geumhwa Plant

Assuming the 90 days trading horizon NICE Total Cash is expected to under-perform the Geumhwa Plant. In addition to that, NICE Total is 1.3 times more volatile than Geumhwa Plant Service. It trades about -0.12 of its total potential returns per unit of risk. Geumhwa Plant Service is currently generating about 0.08 per unit of volatility. If you would invest  2,605,000  in Geumhwa Plant Service on February 28, 2024 and sell it today you would earn a total of  155,000  from holding Geumhwa Plant Service or generate 5.95% return on investment over 90 days.

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

NICE Total Cash  vs.  Geumhwa Plant Service

NICE Total Cash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NICE Total Cash has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Geumhwa Plant Service

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Geumhwa Plant Service are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Geumhwa Plant may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with NICE Total and Geumhwa Plant

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

The idea behind NICE Total Cash and Geumhwa Plant Service 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 Stocks Directory module to find actively traded stocks across global markets.