Correlation Between NICE and Dassault Systemes

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

By analyzing existing cross correlation between NICE and Dassault Systemes SA, you can compare the effects of market volatilities on NICE and Dassault Systemes 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 Dassault Systemes. Check out your portfolio center. Please also check ongoing floating volatility patterns of NICE and Dassault Systemes.

Diversification Opportunities for NICE and Dassault Systemes

-0.51

Correlation Coefficient

NICE  Dassault Systemes

Excellent diversification

The 3 months correlation between NICE and Dassault is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding NICE and Dassault Systemes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Systemes 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 Dassault Systemes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Systemes has no effect on the direction of NICE i.e., NICE and Dassault Systemes go up and down completely randomly.

Pair Corralation between NICE and Dassault Systemes

Assuming the 90 days horizon NICE is expected to generate 2.04 times more return on investment than Dassault Systemes. However, NICE is 2.04 times more volatile than Dassault Systemes SA. It trades about -0.1 of its potential returns per unit of risk. Dassault Systemes SA is currently generating about -0.34 per unit of risk. If you would invest  24,500  in NICE on January 19, 2024 and sell it today you would lose (1,400) from holding NICE or give up 5.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

NICE  vs.  Dassault Systemes SA

NICE

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NICE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NICE reported solid returns over the last few months and may actually be approaching a breakup point.

Dassault Systemes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dassault Systemes SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with NICE and Dassault Systemes

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

The idea behind NICE and Dassault Systemes SA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.