Correlation Between NEXON and Entertainment Arts

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

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

Diversification Opportunities for NEXON and Entertainment Arts

0.26

Correlation Coefficient

NEXON  Entertainment Arts

Modest diversification

The 3 months correlation between NEXON and Entertainment is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NEXON Co and Entertainment Arts Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entertainment Arts and NEXON 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 are associated (or correlated) with Entertainment Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entertainment Arts has no effect on the direction of NEXON i.e., NEXON and Entertainment Arts go up and down completely randomly.

Pair Corralation between NEXON and Entertainment Arts

Assuming the 90 days horizon NEXON is expected to generate 60.56 times less return on investment than Entertainment Arts. But when comparing it to its historical volatility, NEXON Co is 5.93 times less risky than Entertainment Arts. It trades about 0.0 of its potential returns per unit of risk. Entertainment Arts Research is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.13  in Entertainment Arts Research on January 19, 2024 and sell it today you would lose (0.11) from holding Entertainment Arts Research or give up 84.62% of portfolio value over 90 days.

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

NEXON Co  vs.  Entertainment Arts Research

NEXON

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NEXON Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NEXON is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Entertainment Arts

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Entertainment Arts Research are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Entertainment Arts demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEXON and Entertainment Arts

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

The idea behind NEXON Co and Entertainment Arts Research 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.