Correlation Between NEXON and Gamma Communications

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

By analyzing existing cross correlation between NEXON Co and Gamma Communications plc, you can compare the effects of market volatilities on NEXON and Gamma Communications 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 Gamma Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEXON and Gamma Communications.

Diversification Opportunities for NEXON and Gamma Communications

0.49

Correlation Coefficient

NEXON  Gamma Communications

Very weak diversification

The 3 months correlation between NEXON and Gamma is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding NEXON Co and Gamma Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications plc 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 Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications plc has no effect on the direction of NEXON i.e., NEXON and Gamma Communications go up and down completely randomly.

Pair Corralation between NEXON and Gamma Communications

Assuming the 90 days horizon NEXON Co is expected to under-perform the Gamma Communications. In addition to that, NEXON is 2.1 times more volatile than Gamma Communications plc. It trades about -0.11 of its total potential returns per unit of risk. Gamma Communications plc is currently generating about -0.07 per unit of volatility. If you would invest  2,020  in Gamma Communications plc on September 24, 2024 and sell it today you would lose (150.00) from holding Gamma Communications plc or give up 7.43% of portfolio value over 90 days.

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

NEXON Co  vs.  Gamma Communications plc

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Gamma Communications plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NEXON and Gamma Communications

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

The idea behind NEXON Co and Gamma Communications plc 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.