Correlation Between KOBE STEEL and Japan Steel
Can any of the company-specific risk be diversified away by investing in both KOBE STEEL and Japan 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 KOBE STEEL and Japan Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KOBE STEEL LTD and The Japan Steel, you can compare the effects of market volatilities on KOBE STEEL and Japan 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 KOBE STEEL with a short position of Japan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of KOBE STEEL and Japan Steel.
Diversification Opportunities for KOBE STEEL and Japan Steel
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KOBE and Japan is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding KOBE STEEL LTD and The Japan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Steel and KOBE STEEL 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 KOBE STEEL LTD are associated (or correlated) with Japan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Steel has no effect on the direction of KOBE STEEL i.e., KOBE STEEL and Japan Steel go up and down completely randomly.
Pair Corralation between KOBE STEEL and Japan Steel
Assuming the 90 days trading horizon KOBE STEEL LTD is expected to generate 0.43 times more return on investment than Japan Steel. However, KOBE STEEL LTD is 2.3 times less risky than Japan Steel. It trades about 0.28 of its potential returns per unit of risk. The Japan Steel is currently generating about 0.02 per unit of risk. If you would invest 966.00 in KOBE STEEL LTD on November 8, 2024 and sell it today you would earn a total of 96.00 from holding KOBE STEEL LTD or generate 9.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
KOBE STEEL LTD vs. The Japan Steel
Performance |
| Timeline |
| KOBE STEEL LTD |
| Japan Steel |
KOBE STEEL and Japan Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KOBE STEEL and Japan Steel
The main advantage of trading using opposite KOBE STEEL and Japan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KOBE STEEL position performs unexpectedly, Japan 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 Japan Steel will offset losses from the drop in Japan Steel's long position.The idea behind KOBE STEEL LTD and The Japan 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.| Japan Steel vs. Schweizer Electronic AG | Japan Steel vs. ELL ENVIRONHLDGS HD 0001 | Japan Steel vs. Dentsply Sirona | Japan Steel vs. Delta Electronics Public |
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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