Correlation Between Palram and Nice

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

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

Diversification Opportunities for Palram and Nice

0.28

Correlation Coefficient

Palram  Nice

Modest diversification

The 3 months correlation between Palram and Nice is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Palram and Nice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nice and Palram 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 Palram are associated (or correlated) with Nice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nice has no effect on the direction of Palram i.e., Palram and Nice go up and down completely randomly.

Pair Corralation between Palram and Nice

Assuming the 90 days trading horizon Palram is expected to generate 0.5 times more return on investment than Nice. However, Palram is 2.0 times less risky than Nice. It trades about 0.33 of its potential returns per unit of risk. Nice is currently generating about 0.01 per unit of risk. If you would invest  663,300  in Palram on September 26, 2024 and sell it today you would earn a total of  175,700  from holding Palram or generate 26.49% return on investment over 90 days.

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

Palram  vs.  Nice

Palram

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Palram are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Palram sustained solid returns over the last few months and may actually be approaching a breakup point.

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 somewhat strong basic indicators, Nice is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Palram and Nice

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

The idea behind Palram and Nice 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.