Correlation Between LEGACY IRON and NIPPON STEEL
Can any of the company-specific risk be diversified away by investing in both LEGACY IRON 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 LEGACY IRON and NIPPON STEEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LEGACY IRON ORE and NIPPON STEEL SPADR, you can compare the effects of market volatilities on LEGACY IRON 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 LEGACY IRON with a short position of NIPPON STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of LEGACY IRON and NIPPON STEEL.
Diversification Opportunities for LEGACY IRON and NIPPON STEEL
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LEGACY and NIPPON is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding LEGACY IRON ORE and NIPPON STEEL SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIPPON STEEL SPADR and LEGACY IRON 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 LEGACY IRON ORE 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 SPADR has no effect on the direction of LEGACY IRON i.e., LEGACY IRON and NIPPON STEEL go up and down completely randomly.
Pair Corralation between LEGACY IRON and NIPPON STEEL
Assuming the 90 days trading horizon LEGACY IRON ORE is expected to under-perform the NIPPON STEEL. In addition to that, LEGACY IRON is 1.5 times more volatile than NIPPON STEEL SPADR. It trades about -0.21 of its total potential returns per unit of risk. NIPPON STEEL SPADR is currently generating about 0.12 per unit of volatility. If you would invest 585.00 in NIPPON STEEL SPADR on August 25, 2024 and sell it today you would earn a total of 20.00 from holding NIPPON STEEL SPADR or generate 3.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LEGACY IRON ORE vs. NIPPON STEEL SPADR
Performance |
| Timeline |
| LEGACY IRON ORE |
| NIPPON STEEL SPADR |
LEGACY IRON and NIPPON STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LEGACY IRON and NIPPON STEEL
The main advantage of trading using opposite LEGACY IRON and NIPPON STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LEGACY IRON 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.| LEGACY IRON vs. Apple Inc | LEGACY IRON vs. Apple Inc | LEGACY IRON vs. Apple Inc | LEGACY IRON vs. Apple Inc |
| NIPPON STEEL vs. ArcelorMittal SA | NIPPON STEEL vs. ArcelorMittal | NIPPON STEEL vs. Nippon Steel | NIPPON STEEL vs. POSCO Holdings |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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