Correlation Between Ni Steel and Lindeman Asia
Can any of the company-specific risk be diversified away by investing in both Ni Steel and Lindeman Asia 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 Ni Steel and Lindeman Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ni Steel and Lindeman Asia Investment, you can compare the effects of market volatilities on Ni Steel and Lindeman Asia 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 Ni Steel with a short position of Lindeman Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ni Steel and Lindeman Asia.
Diversification Opportunities for Ni Steel and Lindeman Asia
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 008260 and Lindeman is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ni Steel and Lindeman Asia Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindeman Asia Investment and Ni Steel 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 Ni Steel are associated (or correlated) with Lindeman Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindeman Asia Investment has no effect on the direction of Ni Steel i.e., Ni Steel and Lindeman Asia go up and down completely randomly.
Pair Corralation between Ni Steel and Lindeman Asia
Assuming the 90 days trading horizon Ni Steel is expected to under-perform the Lindeman Asia. But the stock apears to be less risky and, when comparing its historical volatility, Ni Steel is 2.04 times less risky than Lindeman Asia. The stock trades about -0.02 of its potential returns per unit of risk. The Lindeman Asia Investment is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 424,751 in Lindeman Asia Investment on August 27, 2024 and sell it today you would lose (76,751) from holding Lindeman Asia Investment or give up 18.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ni Steel vs. Lindeman Asia Investment
Performance |
| Timeline |
| Ni Steel |
| Lindeman Asia Investment |
Ni Steel and Lindeman Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ni Steel and Lindeman Asia
The main advantage of trading using opposite Ni Steel and Lindeman Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ni Steel position performs unexpectedly, Lindeman Asia 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 Lindeman Asia will offset losses from the drop in Lindeman Asia's long position.The idea behind Ni Steel and Lindeman Asia Investment 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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