Correlation Between Auto Trader and Nippon Steel
Can any of the company-specific risk be diversified away by investing in both Auto Trader and Nippon Steel 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 Auto Trader and Nippon Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and Nippon Steel, you can compare the effects of market volatilities on Auto Trader and Nippon Steel 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 Auto Trader with a short position of Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Nippon Steel.
Diversification Opportunities for Auto Trader and Nippon Steel
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Auto and Nippon is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel and Auto Trader 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 Auto Trader Group are associated (or correlated) with Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel has no effect on the direction of Auto Trader i.e., Auto Trader and Nippon Steel go up and down completely randomly.
Pair Corralation between Auto Trader and Nippon Steel
Assuming the 90 days trading horizon Auto Trader Group is expected to under-perform the Nippon Steel. In addition to that, Auto Trader is 1.29 times more volatile than Nippon Steel. It trades about -0.03 of its total potential returns per unit of risk. Nippon Steel is currently generating about 0.14 per unit of volatility. If you would invest 1,823 in Nippon Steel on September 1, 2024 and sell it today you would earn a total of 88.00 from holding Nippon Steel or generate 4.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Auto Trader Group vs. Nippon Steel
Performance |
| Timeline |
| Auto Trader Group |
| Nippon Steel |
Auto Trader and Nippon Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and Nippon Steel
The main advantage of trading using opposite Auto Trader and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, Nippon Steel 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 Nippon Steel will offset losses from the drop in Nippon Steel's long position.| Auto Trader vs. FORMPIPE SOFTWARE AB | Auto Trader vs. UNITED UTILITIES GR | Auto Trader vs. COPLAND ROAD CAPITAL | Auto Trader vs. Algonquin Power Utilities |
| Nippon Steel vs. COSMOSTEEL HLDGS | Nippon Steel vs. LEGACY IRON ORE | Nippon Steel vs. BlueScope Steel Limited | Nippon Steel vs. Daido Steel Co |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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