Correlation Between Nice and Golan Plastic

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

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

Diversification Opportunities for Nice and Golan Plastic

0.4

Correlation Coefficient

Nice  Golan Plastic

Very weak diversification

The 3 months correlation between Nice and Golan is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Nice and Golan Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golan Plastic 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 Golan Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golan Plastic has no effect on the direction of Nice i.e., Nice and Golan Plastic go up and down completely randomly.

Pair Corralation between Nice and Golan Plastic

Assuming the 90 days trading horizon Nice is expected to under-perform the Golan Plastic. In addition to that, Nice is 1.25 times more volatile than Golan Plastic. It trades about -0.07 of its total potential returns per unit of risk. Golan Plastic is currently generating about -0.02 per unit of volatility. If you would invest  85,210  in Golan Plastic on February 20, 2024 and sell it today you would lose (2,760) from holding Golan Plastic or give up 3.24% of portfolio value over 90 days.

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

Nice  vs.  Golan Plastic

Nice

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nice has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Golan Plastic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golan Plastic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Golan Plastic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nice and Golan Plastic

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

The idea behind Nice and Golan Plastic 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.