Correlation Between GM and Nippon Steel
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Nippon Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Nippon Steel, you can compare the effects of market volatilities on GM 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 GM with a short position of Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Nippon Steel.
Diversification Opportunities for GM and Nippon Steel
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Nippon is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel and GM 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 General Motors 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 GM i.e., GM and Nippon Steel go up and down completely randomly.
Pair Corralation between GM and Nippon Steel
If you would invest 4,648 in General Motors on August 28, 2024 and sell it today you would earn a total of 1,372 from holding General Motors or generate 29.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 2.38% |
| Values | Daily Returns |
General Motors vs. Nippon Steel
Performance |
| Timeline |
| General Motors |
| Nippon Steel |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Nippon Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Nippon Steel
The main advantage of trading using opposite GM and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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.The idea behind General Motors and Nippon Steel 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.| Nippon Steel vs. GREENX METALS LTD | Nippon Steel vs. ADRIATIC METALS LS 013355 | Nippon Steel vs. Amkor Technology | Nippon Steel vs. Vishay Intertechnology |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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