Correlation Between CHINA HUARONG and NEXON

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

By analyzing existing cross correlation between CHINA HUARONG ENERHD 50 and NEXON Co, you can compare the effects of market volatilities on CHINA HUARONG and NEXON 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 CHINA HUARONG with a short position of NEXON. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and NEXON.

Diversification Opportunities for CHINA HUARONG and NEXON

-0.1

Correlation Coefficient

CHINA HUARONG  NEXON

Good diversification

The 3 months correlation between CHINA and NEXON is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and NEXON Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXON and CHINA HUARONG 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 CHINA HUARONG ENERHD 50 are associated (or correlated) with NEXON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXON has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and NEXON go up and down completely randomly.

Pair Corralation between CHINA HUARONG and NEXON

Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to under-perform the NEXON. In addition to that, CHINA HUARONG is 8.47 times more volatile than NEXON Co. It trades about -0.03 of its total potential returns per unit of risk. NEXON Co is currently generating about 0.31 per unit of volatility. If you would invest  1,220  in NEXON Co on September 17, 2024 and sell it today you would earn a total of  140.00  from holding NEXON Co or generate 11.48% return on investment over 90 days.

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

CHINA HUARONG ENERHD 50  vs.  NEXON Co

CHINA HUARONG ENERHD

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA HUARONG ENERHD 50 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, CHINA HUARONG reported solid returns over the last few months and may actually be approaching a breakup point.

NEXON

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. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with CHINA HUARONG and NEXON

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

The idea behind CHINA HUARONG ENERHD 50 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.