Correlation Between Cars and Nishi-Nippon Railroad
Can any of the company-specific risk be diversified away by investing in both Cars and Nishi-Nippon Railroad 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 Cars and Nishi-Nippon Railroad into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and Nishi Nippon Railroad Co, you can compare the effects of market volatilities on Cars and Nishi-Nippon Railroad 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 Cars with a short position of Nishi-Nippon Railroad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Nishi-Nippon Railroad.
Diversification Opportunities for Cars and Nishi-Nippon Railroad
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Cars and Nishi-Nippon is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Nishi Nippon Railroad Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nishi Nippon Railroad and Cars 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 Cars Inc are associated (or correlated) with Nishi-Nippon Railroad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nishi Nippon Railroad has no effect on the direction of Cars i.e., Cars and Nishi-Nippon Railroad go up and down completely randomly.
Pair Corralation between Cars and Nishi-Nippon Railroad
Assuming the 90 days horizon Cars Inc is expected to generate 1.77 times more return on investment than Nishi-Nippon Railroad. However, Cars is 1.77 times more volatile than Nishi Nippon Railroad Co. It trades about 0.37 of its potential returns per unit of risk. Nishi Nippon Railroad Co is currently generating about 0.24 per unit of risk. If you would invest 1,460 in Cars Inc on September 4, 2024 and sell it today you would earn a total of 390.00 from holding Cars Inc or generate 26.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cars Inc vs. Nishi Nippon Railroad Co
Performance |
| Timeline |
| Cars Inc |
| Nishi Nippon Railroad |
Cars and Nishi-Nippon Railroad Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and Nishi-Nippon Railroad
The main advantage of trading using opposite Cars and Nishi-Nippon Railroad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, Nishi-Nippon Railroad 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 Nishi-Nippon Railroad will offset losses from the drop in Nishi-Nippon Railroad's long position.| Cars vs. Penske Automotive Group | Cars vs. Asbury Automotive Group | Cars vs. Superior Plus Corp | Cars vs. NMI Holdings |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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