Correlation Between NICE and Autodesk

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

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

Diversification Opportunities for NICE and Autodesk

-0.12

Correlation Coefficient

NICE  Autodesk

Good diversification

The 3 months correlation between NICE and Autodesk is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding NICE and Autodesk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autodesk and NICE 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 are associated (or correlated) with Autodesk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autodesk has no effect on the direction of NICE i.e., NICE and Autodesk go up and down completely randomly.

Pair Corralation between NICE and Autodesk

Assuming the 90 days horizon NICE is expected to generate 2.52 times more return on investment than Autodesk. However, NICE is 2.52 times more volatile than Autodesk. It trades about 0.07 of its potential returns per unit of risk. Autodesk is currently generating about -0.12 per unit of risk. If you would invest  19,700  in NICE on January 25, 2024 and sell it today you would earn a total of  3,000  from holding NICE or generate 15.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

NICE  vs.  Autodesk

NICE

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NICE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, NICE reported solid returns over the last few months and may actually be approaching a breakup point.

Autodesk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Autodesk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with NICE and Autodesk

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

The idea behind NICE and Autodesk 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.