Correlation Between CHINA STATE and NITTO DENKO

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Can any of the company-specific risk be diversified away by investing in both CHINA STATE and NITTO DENKO 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 CHINA STATE and NITTO DENKO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA STATE STRU and NITTO DENKO P, you can compare the effects of market volatilities on CHINA STATE and NITTO DENKO 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 CHINA STATE with a short position of NITTO DENKO. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA STATE and NITTO DENKO.

Diversification Opportunities for CHINA STATE and NITTO DENKO

-0.44
  Correlation Coefficient

Very good diversification

The 3 months correlation between CHINA and NITTO is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding CHINA STATE STRU and NITTO DENKO P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NITTO DENKO P and CHINA STATE 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 CHINA STATE STRU are associated (or correlated) with NITTO DENKO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NITTO DENKO P has no effect on the direction of CHINA STATE i.e., CHINA STATE and NITTO DENKO go up and down completely randomly.

Pair Corralation between CHINA STATE and NITTO DENKO

Assuming the 90 days trading horizon CHINA STATE STRU is expected to under-perform the NITTO DENKO. But the stock apears to be less risky and, when comparing its historical volatility, CHINA STATE STRU is 3.19 times less risky than NITTO DENKO. The stock trades about -0.22 of its potential returns per unit of risk. The NITTO DENKO P is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,500  in NITTO DENKO P on September 24, 2024 and sell it today you would earn a total of  120.00  from holding NITTO DENKO P or generate 8.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

CHINA STATE STRU  vs.  NITTO DENKO P

 Performance 
       Timeline  
CHINA STATE STRU 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in CHINA STATE STRU are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CHINA STATE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
NITTO DENKO P 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in NITTO DENKO P are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, NITTO DENKO may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CHINA STATE and NITTO DENKO Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CHINA STATE and NITTO DENKO

The main advantage of trading using opposite CHINA STATE and NITTO DENKO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA STATE position performs unexpectedly, NITTO DENKO 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 NITTO DENKO will offset losses from the drop in NITTO DENKO's long position.
The idea behind CHINA STATE STRU and NITTO DENKO P 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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