Correlation Between Nicholas and Nicholas Equity

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

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

Diversification Opportunities for Nicholas and Nicholas Equity

0.66

Correlation Coefficient

Nicholas  Nicholas Equity

Poor diversification

The 3 months correlation between Nicholas and Nicholas is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Nicholas Ltd Edition and Nicholas Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nicholas Equity Income and Nicholas 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 Nicholas Ltd Edition are associated (or correlated) with Nicholas Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nicholas Equity Income has no effect on the direction of Nicholas i.e., Nicholas and Nicholas Equity go up and down completely randomly.

Pair Corralation between Nicholas and Nicholas Equity

Assuming the 90 days horizon Nicholas Ltd Edition is expected to generate 2.07 times more return on investment than Nicholas Equity. However, Nicholas is 2.07 times more volatile than Nicholas Equity Income. It trades about 0.1 of its potential returns per unit of risk. Nicholas Equity Income is currently generating about 0.01 per unit of risk. If you would invest  3,017  in Nicholas Ltd Edition on September 16, 2024 and sell it today you would earn a total of  201.00  from holding Nicholas Ltd Edition or generate 6.66% return on investment over 90 days.

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

Nicholas Ltd Edition  vs.  Nicholas Equity Income

Nicholas Edition

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nicholas Ltd Edition are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Nicholas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nicholas Equity Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nicholas Equity Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Nicholas Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nicholas and Nicholas Equity

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

The idea behind Nicholas Ltd Edition and Nicholas Equity Income 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.