Correlation Between China Resources and Nippon Steel
Can any of the company-specific risk be diversified away by investing in both China Resources 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 China Resources and Nippon Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Resources Beer and Nippon Steel, you can compare the effects of market volatilities on China Resources 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 China Resources with a short position of Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Nippon Steel.
Diversification Opportunities for China Resources and Nippon Steel
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Nippon is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel and China Resources 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 Resources Beer 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 China Resources i.e., China Resources and Nippon Steel go up and down completely randomly.
Pair Corralation between China Resources and Nippon Steel
Assuming the 90 days horizon China Resources Beer is expected to under-perform the Nippon Steel. In addition to that, China Resources is 2.18 times more volatile than Nippon Steel. It trades about -0.18 of its total potential returns per unit of risk. Nippon Steel is currently generating about 0.1 per unit of volatility. If you would invest 1,825 in Nippon Steel on August 27, 2024 and sell it today you would earn a total of 65.00 from holding Nippon Steel or generate 3.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Beer vs. Nippon Steel
Performance |
| Timeline |
| China Resources Beer |
| Nippon Steel |
China Resources and Nippon Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Nippon Steel
The main advantage of trading using opposite China Resources and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources 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.| China Resources vs. LIFENET INSURANCE CO | China Resources vs. INSURANCE AUST GRP | China Resources vs. REVO INSURANCE SPA | China Resources vs. DiamondRock Hospitality |
| Nippon Steel vs. Apple Inc | Nippon Steel vs. Apple Inc | Nippon Steel vs. Apple Inc | Nippon Steel vs. Microsoft |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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