Correlation Between Basic Materials and Nomura Holdings
Can any of the company-specific risk be diversified away by investing in both Basic Materials and Nomura Holdings 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 Basic Materials and Nomura Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Nomura Holdings, you can compare the effects of market volatilities on Basic Materials and Nomura Holdings 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 Basic Materials with a short position of Nomura Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Nomura Holdings.
Diversification Opportunities for Basic Materials and Nomura Holdings
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Basic and Nomura is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Nomura Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomura Holdings and Basic Materials 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 Basic Materials are associated (or correlated) with Nomura Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomura Holdings has no effect on the direction of Basic Materials i.e., Basic Materials and Nomura Holdings go up and down completely randomly.
Pair Corralation between Basic Materials and Nomura Holdings
Assuming the 90 days trading horizon Basic Materials is expected to under-perform the Nomura Holdings. But the index apears to be less risky and, when comparing its historical volatility, Basic Materials is 2.12 times less risky than Nomura Holdings. The index trades about -0.03 of its potential returns per unit of risk. The Nomura Holdings is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 2,815 in Nomura Holdings on August 29, 2024 and sell it today you would earn a total of 715.00 from holding Nomura Holdings or generate 25.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Basic Materials vs. Nomura Holdings
Performance |
| Timeline |
Basic Materials and Nomura Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Nomura Holdings
Pair trading matchups for Nomura Holdings
Pair Trading with Basic Materials and Nomura Holdings
The main advantage of trading using opposite Basic Materials and Nomura Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, Nomura Holdings 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 Nomura Holdings will offset losses from the drop in Nomura Holdings' long position.| Basic Materials vs. CM Hospitalar SA | Basic Materials vs. Metalurgica Gerdau SA | Basic Materials vs. Broadcom | Basic Materials vs. Multilaser Industrial SA |
| Nomura Holdings vs. Morgan Stanley | Nomura Holdings vs. The Charles Schwab | Nomura Holdings vs. The Goldman Sachs | Nomura Holdings vs. Banco BTG Pactual |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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