Correlation Between Farmers and Nippon Steel
Can any of the company-specific risk be diversified away by investing in both Farmers 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 Farmers and Nippon Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farmers And Merchants and Nippon Steel Corp, you can compare the effects of market volatilities on Farmers 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 Farmers with a short position of Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers and Nippon Steel.
Diversification Opportunities for Farmers and Nippon Steel
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Farmers and Nippon is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Farmers And Merchants and Nippon Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel Corp and Farmers 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 Farmers And Merchants 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 Corp has no effect on the direction of Farmers i.e., Farmers and Nippon Steel go up and down completely randomly.
Pair Corralation between Farmers and Nippon Steel
Given the investment horizon of 90 days Farmers And Merchants is expected to generate 0.26 times more return on investment than Nippon Steel. However, Farmers And Merchants is 3.86 times less risky than Nippon Steel. It trades about 0.25 of its potential returns per unit of risk. Nippon Steel Corp is currently generating about 0.06 per unit of risk. If you would invest 545,000 in Farmers And Merchants on August 27, 2024 and sell it today you would earn a total of 20,000 from holding Farmers And Merchants or generate 3.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farmers And Merchants vs. Nippon Steel Corp
Performance |
| Timeline |
| Farmers And Merchants |
| Nippon Steel Corp |
Farmers and Nippon Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmers and Nippon Steel
The main advantage of trading using opposite Farmers and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers 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.| Farmers vs. First National Bank | Farmers vs. Farmers Merchants Bancorp | Farmers vs. Exchange Bank | Farmers vs. First National of |
| Nippon Steel vs. Olympic Steel | Nippon Steel vs. POSCO Holdings | Nippon Steel vs. Steel Dynamics | Nippon Steel vs. Universal Stainless Alloy |
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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