Correlation Between Nexon Co and Leaf Mobile

Can any of the company-specific risk be diversified away by investing in both Nexon Co and Leaf Mobile 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 Leaf Mobile 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 Leaf Mobile, you can compare the effects of market volatilities on Nexon Co and Leaf Mobile 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 Leaf Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexon Co and Leaf Mobile.

Diversification Opportunities for Nexon Co and Leaf Mobile

0.94

Correlation Coefficient

Nexon Co  Leaf Mobile

Almost no diversification

The 3 months correlation between Nexon and Leaf is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Nexon Co Ltd and Leaf Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leaf Mobile 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 Leaf Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leaf Mobile has no effect on the direction of Nexon Co i.e., Nexon Co and Leaf Mobile go up and down completely randomly.

Pair Corralation between Nexon Co and Leaf Mobile

Assuming the 90 days horizon Nexon Co Ltd is expected to generate 0.7 times more return on investment than Leaf Mobile. However, Nexon Co Ltd is 1.42 times less risky than Leaf Mobile. It trades about -0.12 of its potential returns per unit of risk. Leaf Mobile is currently generating about -0.12 per unit of risk. If you would invest  1,724  in Nexon Co Ltd on October 1, 2024 and sell it today you would lose (242.00) from holding Nexon Co Ltd or give up 14.04% of portfolio value over 90 days.

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

Nexon Co Ltd  vs.  Leaf Mobile

Nexon Co

Risk-Adjusted Performance

0 of 100

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 fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Leaf Mobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leaf Mobile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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 Nexon Co and Leaf Mobile

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

The idea behind Nexon Co Ltd and Leaf Mobile 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..